【Suggested to Bookmark】Understand the recently popular Huma Finance with 3 images!
Previously, I wrote three articles about Huma Finance, analyzing the project step by step from shallow to deep.
Here, I will summarize the core viewpoints of the previous articles, which can be systematically summarized with three images. Everyone is welcome to discuss!
1. What is the background of Huma Finance's project?
The founder of Huma Finance is a serial entrepreneur with extensive experience in the payment field.
Huma Finance's business model is very healthy, having established its own stable income and cash flow.
The founder of Huma Finance clearly stated that a significant portion of Huma's tokens will be directly allocated to the community.
Reliable team background + stable business model + project landscape opening up = absolutely a major project!
Investing in a project is essentially investing in people. From the founder's interviews, one can sense their strong sense of belief; how could such a team not achieve good results?
2. What exactly is Huma Finance doing with cross-border payment financing?
Complete process: On-chain users lend funds → Cross-border payment institutions request loans → Cross-border payment institutions provide collateral → Cross-border payment institutions borrow USDC and execute payments → Cross-border payment institutions repay the loan.
Huma has built a lending platform where ordinary users act as lenders, providing sources of funds, while cross-border payment institutions act as borrowers.
In the cross-border payment scenario, the remitter pays the local currency A of country A. If using the traditional Swift settlement system, it takes 3-6 working days and incurs very high fees, involving exchange rate differences and currency conversion fees, usually between 1%-3%.
So, after the cross-border payment institution receives the payment from the remitter, rather than going through Swift, it uses USDC as an intermediary currency, borrows stablecoins on the Huma platform, and then directly converts USDC into local currency B in the target country B. This payment process can be completed within the same day.
Throughout the process, Huma provides short-term financing for cross-border payment institutions in the form of USDC, while the institutions need to find a third-party OTC service provider for one outbound and one inbound transaction.
Huma's entire operational process and business model are relatively clear.
Overall, Huma is building a PayFi platform and PayFi ecosystem. This project can be said to be a combination of practical and narrative projects, worthy of long-term attention.
3. Is Huma's operational model sustainable? What money does Huma actually make? What are the risk points for Huma?
In simple terms, Huma is a lending platform, but unlike on-chain lending platforms like AAVE, where both lending and borrowing are done by on-chain users, Huma targets ordinary on-chain users for lending, while the borrowing side consists of real-world enterprises.
This is why it is said that Huma is also an RWA project, encapsulating real-world assets into on-chain assets, allowing any user to participate without permission or KYC.
We can see that the key lies in the asset side: whether those borrowing the money are reliable, whether there are bad debts, and whether the platform can effectively control risks.
Huma's asset side is of high quality, primarily focusing on cross-border payment institutions, providing them with short-term financing.
First, there is equivalent collateral, meaning the local currency funds received by the payment institution need to be held in a regulated account;
Second, the payment institution has compliance qualifications;
Third, the repayment period is short, within 3-5 days, thus the risk is lower than long repayment periods.
Logically speaking, Huma provides a service like Swift, offering financing rather than the consumer loans or business loans commonly seen in P2P enterprises, which do not rely on the borrower's credit or long-term operation status.
To answer the initial three questions:
Huma's model is sustainable, with clear demand scenarios, and has been validated in Web2 companies;
Huma earns interest spreads, as cross-border payment institutions are willing to pay for faster and cheaper remittances;
Huma's risk points mainly lie in the security of on-chain contracts and the transparency of off-chain processes, and Huma needs to disclose more information.
Overall, Huma can be said to be a truly good project, worthy of early investment.
@humafinance @DrPayFi
