Article author: haonan Article compiled by: Block unicorn Foreword Users of the global unsecured consumer credit market are like fat sheep in modern finance—slow to act, lacking judgment, and lacking mathematical ability. As unsecured consumer credit shifts to the stablecoin track, its operating mechanism will change, and new participants will have the opportunity to get a share of the pie. Huge market In the United States, the primary form of unsecured lending is credit cards: this ubiquitous, highly liquid, and instantly available credit instrument allows consumers to borrow money without providing collateral when making purchases. Outstanding credit card debt continues to grow and has now reached approximately $1.21 trillion. outdated technology The last major transformation in the credit card lending sector occurred in the 1990s when Capital One introduced a risk-based pricing model, a groundbreaking move that reshaped the landscape of consumer credit. Since then, despite the emergence of numerous new banks and fintech companies, the structure of the credit card industry has remained largely unchanged. However, the emergence of stablecoins and on-chain credit protocols has brought new foundations to the industry: programmable money, transparent markets, and real-time funding. They promise to ultimately disrupt this cycle, redefining how credit is generated, financed, and repaid in a digital, borderless economic environment. In today's bank card payment systems, there is a time lag between authorization (transaction approval) and settlement (the issuing institution transferring funds to the merchant through the card network). By moving the funds processing flow onto the blockchain, these receivables can be tokenized and financed in real time. Imagine a consumer purchases goods worth $5,000. The transaction is immediately authorized. Before settling with Visa or Mastercard, the issuing institution tokenizes the receivables on-chain and receives $5,000 worth of USDC from a decentralized credit pool. Once settlement is complete, the issuing institution sends these funds to the merchant. Subsequently, when the borrower makes a repayment, the repayment amount will be automatically returned to the on-chain lender via a smart contract. Again, the entire process is conducted in real time. This approach enables real-time liquidity, transparent funding sources, and automatic repayments, thereby reducing counterparty risk and eliminating many of the manual processes that still exist in today's consumer credit. From securitization to fund pooling For decades, the consumer credit market has relied on deposits and securitization to enable large-scale lending. Banks and credit card issuers package thousands of receivables into asset-backed securities (ABS) and then sell them to institutional investors. This structure provides ample liquidity but also introduces complexity and opacity. "Buy Now, Pay Later" (BNPL) lenders like Affirm and Afterpay have demonstrated the evolution of credit approval processes. Instead of offering a universal credit line, they review each transaction at the point of sale, differentiating between a $10,000 sofa and a $200 pair of sneakers. This transaction-level risk control produces standardized, divisible accounts receivable, with each receivable having a clearly defined borrower, term, and risk profile, making it an ideal choice for real-time matching through on-chain lending pools. On-chain lending can be further expanded by creating dedicated credit pools tailored to specific borrower demographics or product categories. For example, one credit pool could fund small transactions for high-quality borrowers, while another could specifically offer travel installment plans for less-than-ideal consumers. Over time, these pools of funds may evolve into targeted credit markets that enable dynamic pricing and provide transparent performance metrics for all participants. This programmability opens the door to more efficient capital allocation, better interest rates for consumers, and the establishment of an open, transparent, and instantly auditable global market for unsecured consumer credit. Emerging on-chain credit stack Reimagining unsecured lending for the on-chain era is not simply about porting credit products to the blockchain; it requires fundamentally rebuilding the entire credit infrastructure. Beyond card issuers and processors, the traditional lending ecosystem relies on a complex network of intermediaries: We need new ways of credit scoring. Traditional credit scoring systems, such as FICO and VantageScore, may be ported to the blockchain, but decentralized identity and reputation systems may play a greater role. Lenders will also need credit assessments, which are equivalent to ratings from S&P, Moody's, or Fitch, to evaluate approval quality and repayment performance. Finally, the less visible but crucial aspects of loan collection also need improvement. Stablecoin-denominated debt still requires enforcement mechanisms and recovery processes that combine on-chain automation with off-chain legal frameworks. Stablecoins have bridged the gap between fiat currency and on-chain spending. Lending protocols and tokenized money market funds are redefining savings and returns. Bringing unsecured credit on-chain completes this triangle, enabling consumers to borrow seamlessly and investors to fund credit in a transparent manner—all powered by open financial infrastructure.Article author: haonan Article compiled by: Block unicorn Foreword Users of the global unsecured consumer credit market are like fat sheep in modern finance—slow to act, lacking judgment, and lacking mathematical ability. As unsecured consumer credit shifts to the stablecoin track, its operating mechanism will change, and new participants will have the opportunity to get a share of the pie. Huge market In the United States, the primary form of unsecured lending is credit cards: this ubiquitous, highly liquid, and instantly available credit instrument allows consumers to borrow money without providing collateral when making purchases. Outstanding credit card debt continues to grow and has now reached approximately $1.21 trillion. outdated technology The last major transformation in the credit card lending sector occurred in the 1990s when Capital One introduced a risk-based pricing model, a groundbreaking move that reshaped the landscape of consumer credit. Since then, despite the emergence of numerous new banks and fintech companies, the structure of the credit card industry has remained largely unchanged. However, the emergence of stablecoins and on-chain credit protocols has brought new foundations to the industry: programmable money, transparent markets, and real-time funding. They promise to ultimately disrupt this cycle, redefining how credit is generated, financed, and repaid in a digital, borderless economic environment. In today's bank card payment systems, there is a time lag between authorization (transaction approval) and settlement (the issuing institution transferring funds to the merchant through the card network). By moving the funds processing flow onto the blockchain, these receivables can be tokenized and financed in real time. Imagine a consumer purchases goods worth $5,000. The transaction is immediately authorized. Before settling with Visa or Mastercard, the issuing institution tokenizes the receivables on-chain and receives $5,000 worth of USDC from a decentralized credit pool. Once settlement is complete, the issuing institution sends these funds to the merchant. Subsequently, when the borrower makes a repayment, the repayment amount will be automatically returned to the on-chain lender via a smart contract. Again, the entire process is conducted in real time. This approach enables real-time liquidity, transparent funding sources, and automatic repayments, thereby reducing counterparty risk and eliminating many of the manual processes that still exist in today's consumer credit. From securitization to fund pooling For decades, the consumer credit market has relied on deposits and securitization to enable large-scale lending. Banks and credit card issuers package thousands of receivables into asset-backed securities (ABS) and then sell them to institutional investors. This structure provides ample liquidity but also introduces complexity and opacity. "Buy Now, Pay Later" (BNPL) lenders like Affirm and Afterpay have demonstrated the evolution of credit approval processes. Instead of offering a universal credit line, they review each transaction at the point of sale, differentiating between a $10,000 sofa and a $200 pair of sneakers. This transaction-level risk control produces standardized, divisible accounts receivable, with each receivable having a clearly defined borrower, term, and risk profile, making it an ideal choice for real-time matching through on-chain lending pools. On-chain lending can be further expanded by creating dedicated credit pools tailored to specific borrower demographics or product categories. For example, one credit pool could fund small transactions for high-quality borrowers, while another could specifically offer travel installment plans for less-than-ideal consumers. Over time, these pools of funds may evolve into targeted credit markets that enable dynamic pricing and provide transparent performance metrics for all participants. This programmability opens the door to more efficient capital allocation, better interest rates for consumers, and the establishment of an open, transparent, and instantly auditable global market for unsecured consumer credit. Emerging on-chain credit stack Reimagining unsecured lending for the on-chain era is not simply about porting credit products to the blockchain; it requires fundamentally rebuilding the entire credit infrastructure. Beyond card issuers and processors, the traditional lending ecosystem relies on a complex network of intermediaries: We need new ways of credit scoring. Traditional credit scoring systems, such as FICO and VantageScore, may be ported to the blockchain, but decentralized identity and reputation systems may play a greater role. Lenders will also need credit assessments, which are equivalent to ratings from S&P, Moody's, or Fitch, to evaluate approval quality and repayment performance. Finally, the less visible but crucial aspects of loan collection also need improvement. Stablecoin-denominated debt still requires enforcement mechanisms and recovery processes that combine on-chain automation with off-chain legal frameworks. Stablecoins have bridged the gap between fiat currency and on-chain spending. Lending protocols and tokenized money market funds are redefining savings and returns. Bringing unsecured credit on-chain completes this triangle, enabling consumers to borrow seamlessly and investors to fund credit in a transparent manner—all powered by open financial infrastructure.