Whitepaper v1.0 — February 2026
Halo Protocol
Decentralized Lending Circles with On-Chain Credit Scoring on the Stacks Blockchain
Abstract
Halo Protocol introduces a decentralized implementation of Rotating Savings and Credit Associations (ROSCAs) on the Stacks blockchain. By combining the centuries-old practice of community-based lending circles with programmable smart contracts and Bitcoin-secured finality, Halo enables participants to build verifiable, portable credit scores without relying on centralized credit bureaus. The protocol targets the 2 billion adults worldwide who lack access to formal financial services, providing a trustless mechanism for cooperative savings and credit building.
1. Problem Statement
An estimated 2 billion adults globally remain unbanked, lacking access to basic financial services such as savings accounts, credit lines, and insurance. Even in developed economies, millions are considered “credit invisible”—individuals with no credit history at traditional bureaus, effectively locked out of housing, employment, and lending markets.
Traditional credit scoring systems suffer from three fundamental flaws:
Centralization
A handful of credit bureaus control the financial identities of billions. Data breaches, errors, and opaque algorithms disproportionately harm vulnerable populations.
Exclusion
Traditional models require existing credit to build credit, creating a circular dependency that excludes first-time borrowers, immigrants, and the economically marginalized.
Opacity
Scoring algorithms are proprietary black boxes. Consumers cannot audit, verify, or port their credit data between providers or jurisdictions.
Meanwhile, informal lending circles (known as tandas, chit funds, susus, or ROSCAs) have operated successfully across cultures for centuries. These community-based savings groups demonstrate that peer accountability and social trust can underwrite financial cooperation without institutional intermediaries. Halo Protocol formalizes this model on-chain.
2. Mechanism Design: The ROSCA Model
A Rotating Savings and Credit Association is a group of individuals who agree to contribute a fixed amount of money to a common pool at regular intervals. In each round, one member receives the entire pool. The rotation continues until every member has received the payout exactly once.
Circle Lifecycle
Formation
A creator defines the circle parameters: contribution amount, number of members, payout frequency, and token type (hUSD or sBTC). Members join by registering their on-chain identity.
Activation
Once the required number of members join, the circle activates. The smart contract locks the configuration and begins tracking rounds.
Contribution Rounds
Each round, all members contribute the fixed amount to the vault contract. Contributions are recorded on-chain with timestamps for credit scoring.
Payout
The designated recipient for the round receives the pooled funds from the vault. Payout order is determined at activation.
Completion
After all members have received their payout, the circle completes. Final credit score adjustments are applied based on participation quality.
3. Credit Scoring Algorithm
Halo Protocol implements a transparent, on-chain credit scoring system with scores ranging from 300 (minimum) to 850 (maximum). Unlike traditional credit bureaus, every factor and weight is publicly auditable in the smart contract code. Scores are computed deterministically from on-chain data.
Score Components
Payment History
35% weightThe single most important factor. Tracks the ratio of on-time contributions to total expected contributions across all circles. Late or missed payments have a significant negative impact. Maximum contribution: +192 points.
Circle Completion
25% weightMeasures the number of circles a participant has completed without defaulting. Completing circles demonstrates long-term reliability and commitment to the community. Maximum contribution: +137 points.
Account Age
15% weightLonger participation history indicates stability. Calculated from the block height of the first on-chain identity registration to the current block. Maximum contribution: +82 points.
Utilization
15% weightMeasures the total volume of funds contributed relative to capacity. Healthy utilization signals active participation without overextension. Includes both STX and token-denominated contributions. Maximum contribution: +82 points.
Diversity
10% weightRewards participation across different circle sizes, token types, and contribution amounts. Diversified participation demonstrates adaptability and broad community engagement. Maximum contribution: +55 points.
All new participants begin at 300. The theoretical maximum of 850 requires sustained, diversified participation over an extended period. Score tiers: Building (300-499), Fair (500-649), Good (650-749), Excellent (750-850).
4. Technical Architecture
Halo Protocol is built on the Stacks blockchain, a Layer 2 that settles transactions on Bitcoin. This provides the security guarantees of Bitcoin's proof-of-work consensus while enabling the expressive smart contract capabilities required for ROSCA management and credit scoring.
Clarity Smart Contracts
All protocol logic is implemented in Clarity, a decidable language that prevents reentrancy attacks and enables complete static analysis. Clarity's interpreted execution means what you see in the source code is exactly what runs on-chain—no compiler bugs, no hidden optimizations. The protocol uses 8 contracts with explicit, minimal trust boundaries between them.
Bitcoin Settlement
Every Stacks transaction is anchored to a Bitcoin block through the Proof of Transfer (PoX) consensus mechanism. This means circle contributions, payouts, and credit score updates inherit Bitcoin's finality. Reversing a Halo transaction would require reorganizing the Bitcoin blockchain itself.
Vault Security Model
Circle funds are held in the halo-vault contract, not in user wallets or the circle contract. The vault enforces strict access controls: only authorized circle contracts can deposit or withdraw, and only the designated round recipient can claim the payout. This separation of concerns limits the blast radius of any single contract vulnerability.
sBTC Staking Integration
The halo-sbtc-staking contract enables participants to stake sBTC (synthetic Bitcoin on Stacks) for yield generation and credit score boosts. Staking demonstrates long-term commitment to the protocol and provides additional security through economic alignment between participants and the network.
5. Token Design
Halo Protocol supports two token standards for circle contributions, both compliant with the SIP-010 fungible token standard:
hUSD (Halo USD)
A stable-value token used for circle contributions. hUSD is backed by protocol reserves and can be deposited into the vault to earn yield and unlock circle participation capacity.
sBTC (Synthetic Bitcoin)
A 1:1 Bitcoin-backed token on Stacks. sBTC-denominated circles allow participants to build credit while maintaining Bitcoin exposure. sBTC can also be staked in the halo-sbtc-staking contract for additional yield and credit score benefits.
6. Roadmap
Phase 1-7: Foundation (Completed)
Smart contract development, backend API, frontend application, security hardening, deployment scripts, and production hardening. 400+ tests passing across all layers.
Phase 8: Mainnet Launch
Live deployment on Stacks mainnet with USDCx and sBTC support. Vault-v3 with real yield strategies. Multi-asset circle formation and credit score accumulation.
Phase 9: Security Audit & Mainnet
Third-party security audit of all 8 smart contracts. Resolution of critical and high findings. Mainnet deployment with real value at stake.
Phase 10: Ecosystem Growth
Cross-protocol credit score portability. Integration with DeFi lending markets. Governance token and DAO formation for protocol parameter management. Mobile application launch.