Union Protocol Review 2026: Credit Backed by Trust

Union Protocol is an open-source DeFi credit protocol. Its pitch is credit backed by trust instead of collateral: you vouch for people you know, and they can borrow against those vouches. The homepage lists no collateral, no credit score and no middlemen as the core ideas.

The protocol is tracked under uncollateralised lending and has been listed since June 2022. The homepage says it runs on Ethereum, Base and Optimism, and tracked data also shows Arbitrum. Union v2 was announced as live on Optimism, and public reporting mentions a later Union V3 upgrade from the wider Union project.

The tracked TVL is roughly $266,000, which is small. The project also points to uses beyond friends lending to each other, such as business credit, NFT-holder vouching contracts and automated programs that underwrite and borrow onchain.

Union replaces collateral with trust. A user stakes stablecoins and vouches for another address, which extends that address a line of credit. The more vouches someone gets, the more credit they can draw on.

A borrower uses the credit line from any wallet, without a credit score or middleman. Stakers who vouched earn when the borrower takes a loan and receive UNION tokens for backing people. If a borrower does not repay, the stakers who backed them are the ones exposed to the loss.

Governance sits with UNION token holders, who vote on parameters including the rate. Developers can also build on the system, since credit can be borrowed and lent directly from a smart contract.

Union does not publish a fixed fee schedule on its homepage. It says all parameters, including the interest rate, are decided by the users through governance, so the rate can change over time.

Borrowers pay interest, and stakers who vouch earn when those they back borrow, plus UNION token rewards. Current rates and any origination or network costs would appear in the app and the documentation. Gas fees on the chosen network apply to every transaction.

Tracked data lists no audits for Union, and the project's own documentation says the protocol is software that may contain bugs. Users should treat smart-contract risk as real. The docs also describe other risk types, and the main one is credit risk: because borrowers post no collateral, a default is absorbed by the stakers who vouched for them.

Union is non-custodial in the usual DeFi sense, with users interacting from their own wallets. The homepage does not mention an insurance fund, a licence or regulatory status. The project does not name any hack, but the small TVL means limited liquidity and little track record at scale.

Union fits experienced DeFi users, developers and small communities who want to experiment with peer-to-peer credit and can judge the people they vouch for. It is a poor fit for anyone seeking predictable yield or deep liquidity.