Huma Finance is a decentralized finance (DeFi) protocol that focuses on **on-chain credit markets**, allowing users to borrow and lend crypto assets without traditional collateral requirements. Instead, it leverages **real-world identity and reputation** to assess creditworthiness, enabling undercollateralized or uncollateralized loans.
### **Key Features of Huma Finance:**
1. **Undercollateralized Loans** – Unlike most DeFi lending platforms (e.g., Aave, Compound), which require overcollateralization, Huma allows borrowers to access funds with little or no upfront collateral.
2. **Identity-Based Credit Scoring** – Uses **off-chain credit data** (like credit scores, income verification) combined with on-chain behavior to assess risk.
3. **Pool-Based Lending** – Lenders deposit funds into pools, and borrowers draw from them based on their creditworthiness.
4. **Real-World Use Cases** – Targets payroll advances, invoice financing, and other business/consumer credit needs.
5. **Built on Ethereum & Layer 2s** – Designed for scalability and low fees.
### **How It Works:**
- **Borrowers** connect their wallets and undergo identity verification (e.g., KYC) to establish credit limits.
- **Lenders** earn yield by supplying capital to lending pools, with risk adjusted based on borrower profiles.
- **Reputation System** – Borrowers build credit history on-chain, improving terms over time.
