Many people, upon hearing about Huma's ability to 'borrow money using future income' for the first time, worry: what if someone falsifies salary statements or uses fake invoices to cheat? What if a borrower takes the money and doesn’t repay, resulting in a loss for LPs? In fact, these issues have long been resolved by Huma using a set of extremely rigorous smart contracts and risk control logic, making it much safer than you might imagine.
First of all, Huma's smart contracts do not simply 'arbitrarily grant limits', but conduct 'in-depth cash flow analysis'. For example, if you say your monthly salary is 50,000 and you want to borrow 40,000, the smart contract will not approve it directly; it will first check your salary payment records to see if they have been paid on time for more than six months. Has there been a sudden salary reduction? Is the company a legitimate enterprise? It will even relate to your social security and housing fund payment records to confirm that your income is real and stable. Only if all these conditions are met will it grant a limit of 70%-90%, for instance, if your salary is 50,000, you can borrow up to 45,000, ensuring you can definitely repay it.
If a business is borrowing money with invoices, the risk control is even stricter. The smart contract will check the authenticity of the invoices (connecting to the tax system interface), the client's credit record (any history of late payments), and the cooperation history between the business and client (is it a long-term cooperation, any past disputes). For instance, if a business borrows money with a 100,000 invoice, but the client has had three instances of late payment before, Huma might only provide 50% of the limit, or require additional guarantees to minimize risk.
Secondly, Huma uses the Solana chain, and all transactions are transparent and traceable. Your income proof, loan records, and repayment records will all be on-chain, and anyone can check them; it is practically impossible to falsify data. Furthermore, if a borrower defaults, the smart contract will automatically initiate the collection process, such as prioritizing deductions from subsequent income received or freezing the borrower's other on-chain assets to ensure the safety of LP's funds.
Now that Huma has been operating for so long, the bad debt rate has remained very low, precisely because this risk control logic is rigorous enough. It does not 'relax risk control to do business', but prioritizes 'safety', allowing LPs to feel secure putting their money in, and enabling borrowers to confidently borrow money, creating a virtuous cycle.
