Onchain credit is a way for businesses to borrow based on their activity, instead of assets they set aside as security.
Most onchain lending today is overcollateralized: a borrower posts more crypto value than they receive, and that collateral protects the lender if things go wrong. It works, but only for people who already hold enough crypto to secure a loan.
Onchain credit takes a different approach. A lender looks at a business's real payment or settlement activity, verified onchain or through the business's own records, and extends credit based on what that activity shows over time.
How it works
- A lender reviews a borrower's ongoing activity, like payment volume or settlement flows, instead of requiring crypto as collateral.
- Based on that activity, the lender decides how much credit to extend and on what terms.
- Funds, usually stablecoins, are released directly to the borrower.
Repayment is drawn automatically from that same activity, rather than collected manually.
Why onchain credit is different
Collateral-based lending protects itself by selling the collateral if something goes wrong. Onchain credit protects itself by choosing borrowers carefully and watching their activity as it happens.
That opens the door to businesses with no crypto holdings, as long as their activity can be verified.
Who uses onchain credit
This is a business tool, not a consumer product, mostly used by fintechs, payment processors, and similar companies whose activity, like payment volume or settlement flows, can be reviewed and verified.
The bigger picture
Crypto collateral solved a basic problem: how do you lend to someone you don't know? Onchain credit solves it differently, using verified activity instead of an asset held as backup.
