136 million active liquidity hard to retain? Huma relies on these two points to encourage funds to stay long-term in the PayFi network
Active liquidity in DeFi projects is important, but many projects face the issue of "funds coming and going". Users withdraw their investments after making short-term profits, leading to unstable liquidity. However, Huma can maintain 136 million in active liquidity thanks to two key design points.
The first is "stable expected returns". Huma's liquidity providers (LPs) do not make money from "token price surges", but rather from a share of user borrowing interest and transaction fees. These earnings are continuous and predictable. For example, when LPs deposit money into Huma's liquidity pool, they receive a share daily as long as users borrow or transfer money. Moreover, the earnings are less volatile, unlike the dramatic fluctuations seen in cryptocurrency trading, making it suitable for long-term capital.
The second is "low-risk capital safety design". Huma implements strict risk control on every loan (such as analyzing the stability of future income) and has set up a "risk reserve fund". In the event of a small number of bad debts, the reserve is used to cover the losses, so LPs do not have to bear the burden. Compared to some DeFi projects that "go to zero at the first explosion", Huma's capital safety factor is much higher. Therefore, many LPs are willing to keep their money in Huma's liquidity pool long-term, earning stable returns without worrying about the safety of their principal, and thus active liquidity can naturally be retained.