# Crypto Lending with Proofs of Dynamic Assets

Unlike traditional financial lending, most on-chain loans in DeFi require users to provide collateral. In traditional finance, credit-based lending doesn't always require collateral, relying instead on credit information. However, in the DeFi space, due to its trustless, permissionless nature and the absence of KYC, it is difficult for developers to regulate borrowers based on off-chain behavior.

Many projects are exploring ways to implement on-chain credit lending, but this presents significant challenges. The main hurdles involve how to secure off-chain assets and effectively recover them. Despite these difficulties, combining dynamic asset proofs to enhance lending rates and asset utilization is a promising approach.

Fund providers could require borrowers to submit off-chain proofs of identity, assets, or credit, and then perform risk assessments using on-chain data to improve lending terms—for example, increasing the lending rate from 70% to a higher ratio, such as 75-100%. Borrowers would also need to provide dynamic asset certificates at agreed intervals, with repayment or liquidation triggered if asset values change within a certain range.

By integrating on-chain and off-chain data, the potential to improve lending rates and explore on-chain microcredit lending offers a new avenue for DeFi innovation.

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