$HUMA Series Part Nine: The Safe Path of Unsecured Lending
When we talk about "unsecured lending," many people's first reaction is risk. Without collateral, if the borrower defaults, won't the funds be difficult to recover? This is also why the traditional financial system has always been cautious about the unsecured model. However, Huma Finance does not blindly open lending to everyone, but instead uses a unique mechanism to control risks within a reasonable range.
Firstly, the core of HUMA is income verification. Unlike models that rely on collateral, Huma Finance takes "sustainable income" as the core basis for credit. Whether it is salary flow, cash flow for freelancers, or accounts receivable from businesses, these will be supported by on-chain data and cooperating verification parties. This makes the basis for borrowing more real and better reflects a person's repayment ability.
Secondly, HUMA has introduced a time-weighted mechanism (Reward Power). Borrowers or participants who set longer lock-up or usage periods can receive higher credit and rewards. This mechanism not only incentivizes long-term participation but also naturally filters out short-term arbitrage and high-risk behavior, making the protocol operate more robustly.
Thirdly, Huma Finance's protocol layer risk control. It ensures that the bad debt rate remains at an acceptable level through a diversified risk pool, on-chain transparent records, and multi-dimensional strategy combinations. Meanwhile, all operations are executed by smart contracts, reducing the possibility of human manipulation and opaque operations.
Because of this, HUMA not only pioneered the inclusive financial model of "everyone can lend" but also established a trustworthy safety boundary. In today's world where decentralized finance gradually moves towards reality, risk-controlled unsecured lending is the true financial innovation that has the potential for large-scale implementation.