Privacy-Preserving Lending: FHE Could Unlock Uncollateralized Credit

[bonk]

One of the clearest use cases for FHE in DeFi is uncollateralized lending. Traditional finance rarely overcollateralizes, but DeFi does, which limits its scope.

FHE flips the model: users can share encrypted credit or KYC data with a protocol. Smart contracts then verify conditions (“Is the credit score above 700?”) without ever decrypting the data. Borrowers get privacy and no-collateral loans; lenders can still pursue defaults offchain if needed.

This opens the door to institutional-grade lending, private collateral pools and confidential ERC-20s — essentially rebuilding DeFi’s lending stack with privacy as a core primitive.

[EmTeam]

FHE tech sounds revolutionary. Enabling privacy in lending could finally bring DeFi to mainstream users.

[jacson4]

Uncollateralized lending is the holy grail of DeFi. Privacy-preserving systems might make it possible.

[jacson4]

lenders can still pursue defaults offchain if needed.