Anyone who has played with DeFi has likely encountered lending: if you want to borrow some USDC for liquidity, you first need to collateralize ETH or BTC, and the collateralization rate may need to be as low as 70% or even 50%—even though you have the assets in hand, you are kept out because of 'lack of collateral' or 'insufficient collateralization rate'. What @humafinance aims to solve is precisely this 'collateral constraint'.
In simple terms, Huma Finance is a decentralized protocol that focuses on 'unsecured credit lending'. Unlike traditional DeFi lending (such as Aave and Compound), it does not require you to collateralize on-chain assets. Instead, it assesses your repayment ability by analyzing your 'on-chain credit data' (such as historical repayment records, interaction frequency, asset stability, etc.) and then provides a credit limit.
For example: if you have a stable transfer record on-chain for a long time and have repaid small loans from other protocols on time, Huma may directly grant you a USDC limit without collateral, which you can repay at maturity. This is especially friendly to two types of people: first, newcomers who have just entered the space and do not have much assets, and second, users who do not want to collateralize their assets due to concerns about market volatility and liquidation.
Of course, unsecured does not mean unbound. Huma automatically executes repayments through smart contracts; once overdue, your on-chain credit score will decrease, affecting future limits; severe defaults may result in being blacklisted by the protocol. This 'credit system based on on-chain behavior' is its biggest difference from traditional lending.
Next, we will break down its credit scoring mechanism, operational processes, risk control, and other core content. Follow the series to understand this 'new player in unsecured lending' together~
#HumaFinance #DeFi Lending
