How is an off-chain loan verified?
How is an off-chain loan verified?
An on-chain investor can't walk into a borrower's office or read their bank statements. So the question for any off-chain (RWA) loan is simple: how do you know it's real, and how do you know it's still performing?
What gets checked
Verification looks at three things:
- The borrower. Does the business exist, is it who it says it is, and is it allowed to borrow?
- The documents. Are the loan agreement, invoices or contracts genuine and consistent with each other?
- The cash. Are repayments arriving as reported, on time and in the right amounts?
Checking against independent sources
The strongest verification doesn't rely on the borrower's or lender's own spreadsheet. It compares their data with independent sources, such as bank and payment data, so a figure that's been typed in can be checked against what actually happened.
Keeping a fingerprint
Once a document or data set is checked, a cryptographic hash, a unique fingerprint, can be recorded. If anyone later changes the document, even by one character, the fingerprint no longer matches. That makes the record tamper-evident without putting private documents on a public blockchain.
Keeping it running
A loan verified once can go bad later. Continuous verification keeps checking as new data comes in, so a late payment shows up when it happens rather than in next quarter's report.
What verification isn't
Verification is not an audit, and it doesn't promise repayment. It tells you that what you're being shown is real and current. The credit risk, whether the borrower pays, is still there, but it's visible.
Related: What is a hash?, Hash, then anchor and Is Rekord an auditor?.