From Collateralized Lending to Cash Flow Lending: The Disruptive Logic of Huma Finance

The rise of Huma Finance (HUMA) marks a new phase in DeFi lending: shifting from 'asset collateral' to 'cash flow collateral.' The underlying logic of this transition is the time value of money (TVM) — the discounted value of future income today. Through smart contracts, Huma programs this financial concept to provide users with instant liquidity.

The problems with traditional models: over-collateralization leads to inefficient use of funds, while credit lending relies on centralized institutions. Huma's solution is to allow on-chain income streams (such as stablecoin salaries, NFT royalties) to serve as proof of credit. For example, a Web3 developer can collateralize their DAO salary for a loan, while the protocol automatically sets limits and interest rates based on historical data.

The advantages of this model are:

Inclusiveness: covering groups with no collateralized assets but stable income;

Composability: future integration with payment protocols (such as Sablier) and payroll systems (such as Utopia Labs).

If Huma's experiment succeeds, it could give rise to more cash flow-based financial products, such as income securitization or on-chain installment payments, further expanding the boundaries of DeFi. @Huma Finance 🟣 #Humafinance $HUMA