If you are a long-time market participant, you will definitely realize the drawback of DeFi is that it cannot reach users and traditional finance. There have been a few projects supporting unsecured loans such as Goldfinch and Maple Finance, but they have not really operated effectively or captured market share.
A big issue that explains why DeFi is not yet strong in unsecured lending is the difficulty in verifying user identities and accessing credit in the media economy. Just as the law on Blockchain or Crypto is still unclear, it is difficult to legally punish cases of default.
And with this Crypto market, wherever there is a problem, the project is born to solve it. Huma, too, was born to solve those problems.
What is Huma Finance? Huma Finance is a protocol that builds next-generation risk-averse lending solutions backed by income and asset ownership certificates. Or in other words, the protocol supports unsecured lending like the way banks operate. So What is Huma Finance? Let’s find out details in this article!
You can read more articles below to gain a deeper understanding of the field in which the project is developing:
- What is Maple Finance (MPL)? Maple Finance Cryptocurrency Overview
- Maple Finance And The Cracks In The Credit Protocol Sector
What is Huma Finance?
Huma Finance is a protocol that builds next-generation risk-averse lending solutions backed by income and asset ownership certificates. Or in other words, the protocol supports unsecured lending like the way banks operate.
The nature of the protocol is a combination of two traditional financial models and DeFi. According to the traditional model, the borrower’s credit assessment protocol is based on current and future real-life assets. According to DeFi, the protocol evaluates a user’s credit based on all of the user’s valuable assets on On-chain.
Huma Finance supports Stablecoin lending assets, currently only supports USDC but will support more later. Ethereum and Polygon are two networks connected to Huma Finance. It is expected to support more networks in the future.
Huma is a protocol for individuals, companies, projects or businesses to use. With a diverse customer base, this promises to be a very successful project if the product works well.
On Huma, build Pools that support different credit levels, these Pools will be managed by Pool owners. In the Pool there is also an EA – who determines the loan credit level, also known as the Evaluation Agent, offering the most reasonable loan rate. And each Pool has only one EA that operates with the principles set by the Pool owner.
Borrowers just need to wait for the protocol to verify their credit rating with the wallet address. And will be able to borrow assets based on that credit level. Interest is paid periodically along with a portion of the principal until the debt is gone.
The borrower’s credit rating will be assessed by the EA based on data from the DSP. DSP (Decentralized Signal Portfolio) is the department that authenticates borrower accounts to provide information about the borrower’s income, assets and debt. The information includes:
- On-chain: Portfolio, LP assets, Farm positions, borrowing or lending positions, NFTs, NFT royalties, Game earnings, Staking assets and revenue,…
- Off-chain: Sales data (Amazon, Shopify,…): Data credit/debt aggregation like Experian API; Sbalance, transactions and revenue such as Plaid, Teller, Stripe, Quickbooks, Recurly; Invoices like Bill, Stripe, PayPal, Invoice2Go, Square, Zoho,…
A percentage of fees collected on all pool earnings will go to the protocol treasury. Huma DAO decides how to distribute income to participants periodically.
Huma Finance administrative role
Because the protocol supports unsecured lending, the risk on Huma is also quite high. To ensure the safety of the project, the development team has proposed two direct protocol governance components: Protocol Owner and Pausers.
Protocol Owner (multi-sig) is the protocol owner responsible for managing the entire protocol. This is the only account that can change various protocol configurations and perform administrative tasks. Most notably adding, removing pool owners and pausers, unpausing the protocol, and transferring protocol income from the Pool to the protocol repository.
Pausers the entire protocol can be paused. When the protocol is paused, no funds move in or out of the protocol. This is expected to happen in very rare cases, when the security and integrity of the protocol is threatened. Once a protocol is paused, only the protocol owner can unpause it.
Role in Pool
Not as simple as a liquidity pool of Lending platforms collateralized with Crypto assets. Huma’s liquidity pool includes many participants. There are 4 participants in the Pool: Pool Owners, Evaluation Agent, Liquidity Providers, Borrowers.
Pool Owners is a list of addresses approved by the Protocol Owner to create and manage pools. They configure key parameters for the team, select an Assessment Agent, and set the fee structure through the fee manager. They earn a percentage of group income as a reward.
Parameters are decided by the group creator:
- Group liquidity limit
- Group equity commitment
- Agents evaluate capital commitments
- Maximum amount per credit limit
- Liquidity Adder APR
- Initialization fee
- Requires principal payments each period
- Late payment fee
- Membership fees
- Receivable ratio
- Withdrawal lock period
- Default grace period
- The duration of the payment period
Evaluation Agent (EA) makes underwriting decisions, approving or denying credit requests for a group. Each group can only have one Reviewing Agent. CThe EAs will be automated but the protocol also allows the EAs to have human supervision. They earn a percentage of the group income for their contributions as a reward.
To promote accountability, similar to Team Owners, EAs are required to commit capital to the teams they are supporting. Only after both the Pool Owner and the EA have deposited the required capital can a pool be enabled to accept capital from other Liquidity Providers.
Liquidity Providers (also known as Lenders) provide capital to the group and earn a percentage of the group’s income. They can only deposit and withdraw capital from the pool.
Borrowers Initiate credit requests with groups and borrow money if approved by EA. They are responsible for interest payments and minimum principal payments for each payment period.
Huma Finance’s Difference
Huma Finance is a protocol that is bringing a lot of solutions to unlock large liquidity sources. Helps money flow from outside the traditional world easily into Crypto. With 2 most outstanding points compared to other Lending projects:
- Loans are based on the borrower’s credit.
- Supports both Crypto and traditional market credits.
Liquidation
The protocol belongs to the Lending segment but will not have the concept of liquidation, but instead will periodically pay interest and a part of the original asset, this form can be considered installment payment. Because there is no collateral, this is a common way to recover capital from lenders.
Default
Each group has a defined default grace period, which is a multiple of the billing periods. After the grace period ends, if the borrower has not paid the full amount due, the default process will be triggered. The entire balance including principal, interest, and fees will be written off as a loss. Losses will be distributed to Liquidity Providers per their share in the liquidity pool.
Development Roadmap
Updating…
Core Team
Erbil Karaman: Co-Founder
- He is the founder and entrepreneur of many companies such as CampusPeople.com, Rotaractors.com, SahneBenim.com, RealmLab Inc, SPRONGO. During more than 5 years of starting a business, he has accumulated a lot of experience, especially developing social networking platforms.
- After that, he spent 4 and a half years working for Facebook, a leading technology company in the market. At Facebook he has experienced positions such as Product Lead, Founding Product Lead.
- In 2016, he moved to work for Lyft for more than 2 years. Here he held positions such as Advisor, Senior Director of Product Management, Head of Product, Consumer & Platforms.
- Until 2019, he moved to work at Earnin and the position he worked there was Advisor, Chief Product Officer.
- In April 2020, he and his colleagues founded Huma Finance. New generation unsecured lending support project.
Ji Peng: Co-Founder
- First, he graduated with a bachelor’s degree in Dynamics from the University of Science and Technology of China. Not stopping there, he continued to study for a doctorate at the University of Colorado Boulder.
- The first company he worked for after graduating was Earnin. The time he has been with this company is nearly 6 years. The positions he held while working there were Data Scientist, Senior/Lead Data Scientist, Manager, Data Science, Head of Machine Learning.
- Also at Earnin, he met Erbil Karaman. He then quit his job at Earnin and together with his colleagues founded Huma Finance.
Lei Du: Co-Founder
- He graduated with a bachelor’s degree in underwater acoustic engineering from Harbin Engineering University. He then continued to study and successfully obtained a master’s degree in Information Retrieval at Beijing University of Posts and Telecommunications.
- In 2009, he started working for Microsoft as a Machine Learning Engineer. And he has been with this job for about 6 years. Then he moved to Engineering, Data Science Engineering, Data Science at Opendoor.com
- Currently he is Co-Founder of Huma Finance and Advisor for Sancus Ventures.
Investors
February 23, 2023: Seed round successfully raised $8.3M led by Distributed Global, Race Capital with participation from ParaFi Capital, Folius Ventures, Circle Ventures.
Tokenomics
Updating…
Exchanges
Updating…
Huma Finance’s Information Channel
- Website: https://huma.finance/
- Twitter: https://twitter.com/humafinance
- Discord:
Summary
Huma Finance is a very potential project, with an unlimited customer base as well as access to both Crypto and traditional markets. Bringing a new solution for DeFi Lending, bringing DeFi closer to everyone.
But operating under the trust model is quite risky, as user verification or punishment has not been thoroughly applied. If Huma’s products have more improvements in the near future to overcome some small remaining problems, this will definitely be a project worth watching.
So I have clarified what Huma Finance is? Huma Finance cryptocurrency overview. Hope this article gives you a lot of useful knowledge!