VOLATILIS TECHNOLOGICA AIMS TO BE A VISIONARY FORCE DRIVING TRANSFORMATION IN THE WORLD OF FINANCIAL AND DISTRIBUTED LEDGER TECHNOLOGY.
VOLATILIS TECHNOLOGICA AIMS TO BE A VISIONARY FORCE DRIVING TRANSFORMATION IN THE WORLD OF FINANCIAL AND DISTRIBUTED LEDGER TECHNOLOGY.
Subscribe to Volatilis
Subscribe to Volatilis
Share Dialog
Share Dialog
<100 subscribers
<100 subscribers
The CREDIT Protocol is a modular and composable omnichain fixed-income platform that not only serves as a powerful foundation for credit/fixed-income-based products but also functions as a fixed-rate and isolated borrowing and lending platform.
Native to its own dedicated Arbitrum Orbit Appchain “Meliora”; CREDIT eliminates reliance on oracles and liquidations, enhancing stability and transparency, which are often lacking in the DeFi ecosystem.
By offering dynamic determination of interest rates and collateral factors based on market reactions, as well as customizable risk parameters, support for illiquid, volatile, and long-tail assets, and more - CREDIT provides robust infrastructure for secure and efficient lending activities.
With its versatile design, The CREDIT Protocol empowers users to optimize capital utilization, manage risk effectively, and benefit from market diversity. Additionally, it enables developers to experiment with yield curves and expand the DeFi fixed-income/credit market with ease.
Borrowing and Lending AMM
The CREDIT Protocol provides an Automated Market Maker (AMM) platform specifically designed for borrowing and lending purposes.
Oracleless Architecture
By eliminating the reliance on pricing oracles, The CREDIT Protocol significantly reduces risks and potential attack vectors, ensuring a more secure ecosystem.
No Liquidations
Users are not subjected to volatility-induced collateral liquidations. They only need to repay their outstanding debt before the agreed term ends for the lending pool.
Fixed-term Borrowing and Lending
Borrowers can select a specific pool and agree upon the duration of the loan term, providing clarity and predictability to both borrowers and lenders.
Fixed-Rate Structure
Borrowers and lenders can establish a fixed interest rate at the initiation of the loan, which remains constant throughout the loan term, ensuring stability and transparency.
Ecosystem and Partners
The CREDIT Protocol offers treasury management solutions through borrowing and lending and custom pools or vaults - enabling seamless integration with partner platforms.
$CREDIT Token Rebates
In the event of debt defaults, LPs can receive rebates in the form of $CREDIT tokens, fostering a fair and incentivized lending environment.
Liquidity Incentives for LPs
Liquidity Providers (LPs) can earn yield through the CREDIT Protocol by participating in liquidity pools and benefitting from attractive incentives.
Composable Credit Base Layer
The CREDIT Protocol serves as a foundation for more advanced financial products, allowing the development of sophisticated offerings such as our own Automated Strategy Vaults.
Sophisticated Liquidity Provisioning
Liquidity providers can access more advanced options for offering liquidity, enhancing their ability to participate in the ecosystem.
Arbitrage Opportunities
Credit pools within The CREDIT Protocol offer opportunities for arbitrage by capitalizing on interest and collateral imbalances, creating favorable trading conditions.
Maker, Aave, and Compound have paved the way for collateralized money markets, accumulating over $40 billion in locked value within these protocols. While these platforms have successfully established robust financial markets, there is always room for improvement, diversity, and enhancement.
Oracles play a pivotal role in the functioning of lending protocols by acting as intermediaries that provide off-chain data to the blockchain or supply on-chain data to other participants. This data can include token prices, interest rates, or various other market metrics. As DeFi projects heavily rely on oracles to execute logic within their smart contracts, it is crucial to choose oracles that are resistant to manipulation by potential bad actors.
However, despite their critical role, oracles have often been the weak link in the security of DeFi protocols, leading to significant financial losses.
The recurring nature of these incidents highlights the current limitations of price oracles. Although various oracle solutions are currently available, they are either not fully decentralized or, if they are, they remain susceptible to manipulation. Consequently, despite ongoing efforts to develop more robust oracle solutions, the existing offerings continue to pose potential risks for DeFi projects. The issues surrounding oracle security underscore the need for more reliable, manipulation-resistant oracle solutions in the DeFi ecosystem.
Traditional DeFi lending platforms put borrowers at risk by liquidating collateral if its value falls below a specific threshold. This practice creates fear and instability, potentially leading to unfair asset seizures and hindering the growth of the DeFi ecosystem.
The CREDIT Protocol addresses this issue by eliminating collateral liquidations entirely. Borrowers using The CREDIT Protocol are not subjected to the seizure of their collateral if its value decreases. Instead, they only need to repay their outstanding debt before the agreed term ends for the lending pool. By removing the risk of collateral liquidations, The CREDIT Protocol empowers borrowers to leverage their assets effectively and participate more actively in DeFi lending.
This approach fosters a forgiving and user-friendly borrowing experience, instilling trust, stability, and fairness in the lending ecosystem.
In most existing DeFi lending platforms, the fluctuation of interest rates poses a significant challenge for lenders. Calculating returns over time becomes complex due to the volatility, creating uncertainty and hindering the ability to achieve stability and predictability in investments. The absence of fixed interest rates introduces ambiguity, making it difficult for lenders to make well-informed investment decisions.
The CREDIT Protocol revolutionizes this aspect by introducing fixed rates and fixed terms, offering a unique solution to address the challenges faced by lenders. With The CREDIT Protocol, users can enjoy the benefits of a fixed interest rate that remains unchanged throughout the duration of the loan. This stability and predictability provide users with a clear understanding of the interest they will earn from their investments, ensuring a transparent and consistent lending experience.
The CREDIT Protocol is driven purely by market forces. Yes, we have fixed rates that are ‘locked in’ i.e. taken by every individual position, but are not universal, they represent the current market demand when the position is taken- they are unique positions and function as a price/rate discovery mechanism. All variables in the algorithm, such as Interest Rate, collateral factor and borrow limit dynamically change based on activity in the accompanying pool. Every interaction will make the needles move allowing for market exploration. A “hybrid” model this way, the best of both worlds.
By eliminating the uncertainty associated with fluctuating interest rates, the CREDIT Protocol empowers users to calculate their returns accurately and make more informed investment decisions. Lenders can have confidence in their investment strategy, knowing that their expected returns will remain steady throughout the loan period. This feature not only enhances user trust and satisfaction but also encourages greater participation and engagement within the lending ecosystem.
The introduction of dynamic fixed rates and fixed terms through the CREDIT Protocol marks a significant advancement in DeFi lending, as it provides users with a reliable and predictable framework for their investments. By promoting stability and transparency, The CREDIT Protocol sets a new standard for lending platforms and contributes to the overall growth and maturation of the DeFi ecosystem.
Existing DeFi lending platforms primarily focus on supporting highly liquid assets, which excludes a significant portion of the market consisting of volatile, long-tail, and illiquid assets. This limited asset selection restricts investment opportunities and narrows the scope of the DeFi ecosystem, preventing users from fully utilizing their holdings.
The limited availability of asset options in traditional lending platforms has several implications. Firstly, it hampers the growth and adoption of these assets by restricting the liquidity options available to asset holders. Secondly, it reduces investment opportunities for users who hold such assets, limiting their ability to maximize returns and diversify their portfolios. Lastly, it creates a barrier to entry for innovative projects and tokens that do not fit within the framework of highly liquid assets.
The CREDIT Protocol addresses this issue by providing a solution that allows for the creation of new pools for any ERC20 token, including volatile, long-tail, illiquid assets, LP tokens, wrapped NFTs and Social Tokens. By facilitating borrowing and lending activities involving these assets, The CREDIT Protocol unlocks opportunities for users to leverage their holdings, access liquidity, and earn yield on a more diverse range of tokens.
This expanded asset selection opens up new possibilities for users, enabling them to tap into the potential of previously underserved assets. It promotes a more inclusive and vibrant DeFi ecosystem by accommodating a wider range of tokens, fostering innovation, and providing users with greater flexibility in managing their investments. With The CREDIT Protocol, users can explore investment opportunities beyond the highly liquid assets, diversify their portfolios, and participate more actively in the evolving landscape of decentralized finance.
Existing DeFi lending platforms often lack options for borrowers and lenders to customize their risk profiles according to their specific needs. This lack of customization restricts users from aligning their borrowing and lending activities with their risk tolerance and investment strategies. Consequently, users may have to compromise on their preferred risk-return tradeoff, leading to suboptimal decision-making.
Tailored risk profiles are essential for users as they enable them to align their borrowing and lending activities with their risk tolerance and investment strategies. By offering the ability to customize risk exposure, users can optimize their portfolio management, diversify their investments, and mitigate potential losses. Moreover, tailored risk profiles enhance user confidence and satisfaction by providing a more personalized and flexible lending experience.
The CREDIT Protocol effectively addresses this issue by offering increased control and versatility in tailoring risk profiles. Users can select specific pools with time parameters that match their risk appetite, and they can adjust their interest and collateral parameters to an unparalleled degree. Additionally, users have the flexibility to establish a fixed interest rate at the initiation of the loan, which remains constant throughout the loan term. This feature empowers users to manage their expectations and plan their finances with greater certainty.
With the ability to customize risk profiles, users can fine-tune their borrowing and lending activities to align with their specific goals and risk tolerance. This level of customization opens up opportunities for users to optimize their returns while effectively managing and mitigating risks. The CREDIT Protocol sets a new standard in risk customization within the DeFi lending space, empowering users to make informed decisions and tailor their lending activities according to their individual preferences.
Meliora is a user-centric appchain focused on building a robust ecosystem of tailored applications enabling seamless and complexity-abstracted interaction with open money markets.
By leveraging the Arbitrum Orbit rollup stack, we can achieve greater customization and better performance. The CREDIT protocol acts as a foundational layer, which paves the way for us to develop a variety of DApps and create a more comprehensive ecosystem.
High throughput and lower transaction fees are key attributes of Meliora, aligning with Volatilis' vision to reshape finance. As the primary platform for The CREDIT Protocol, Meliora fosters seamless operations across our DApp ecosystem.
Utilizing the rollup chain's benefits, Meliora ensures fast, cost-effective transaction processing. This not only improves user experience but also opens up new revenue opportunities.
The CREDIT protocol functions as a factory contract that generates pair contracts for any combination of ERC20 tokens. These pairs consist of an asset and its corresponding collateral. The factory contract operates in a permissionless manner, allowing any user to create a pair using their selected assets.
Interactions with the CREDIT protocol are facilitated through a dedicated router contract. This router contract simplifies the process by abstracting the underlying complexities associated with direct interaction with the pair contract. It incorporates various protective mechanisms known as "guardrails" that mitigate the risk of errors and safeguard users from potential threats.
The CREDIT protocol caters to three distinct types of users:
Lenders: Lenders, who generally have a lower time preference for their tokens and seek minimal risk, utilize the protocol to earn yield by lending their tokens in a fixed-income environment. They also acquire coverage, which provides claims to the collateral of defaulting borrowers. This feature enables each lender to manage the balance between default risk and potential yield.
Borrowers: Borrowers, on the other hand, typically have a higher time preference for tokens. They may require tokens for immediate use, futures trading, leveraging their collateral, or shorting. Borrowers utilize the protocol to obtain loans with a fixed yield, backed by their collateral. The collateral will only be liquidated and allocated to lenders if the borrower chooses not to repay their debt before expiry.
Liquidity Providers: Liquidity providers play a vital role in the protocol as they provide tokens to the pool, creating markets for both lending and borrowing transactions. They profit from the spread between lenders and borrowers, which is determined by the volume and size of transactions within the pools.
Positions within a pool are represented by an ERC721 token called the CREDIT Position. This token serves as a digital marker, encapsulating and tracking individual user positions. There are three distinct types of CREDIT Positions: Debt, Credit, and Liquidity, each corresponding to different user roles within the ecosystem.
These CREDIT Positions allow associated users to monitor, manage, and retrieve information specific to their positions within the protocol. By categorizing positions into these types, The CREDIT protocol delivers a personalized, transparent, and efficient user experience.
Notably, the protocol does not rely on price feeds or oracles because liquidation is based on the borrower's decisions, assuming rational behavior. As the pool's expiry approaches, borrowers are more likely to repay their debt if the value of their locked collateral exceeds the debt value. Conversely, if the collateral value is lower than the debt value, borrowers are more likely to default.
The CREDIT AMM relies on three variables. The interaction among these variables directly influences the interest rate and the necessary collateral factor for participation in the liquidity pools. This approach allows the protocol to function independently of oracles and liquidations, providing a robust and secure environment.
For instance, an increase in asset lending into the pool results in a decrease in both the interest rate and the collateral factor. However, the borrowing of more assets from the pool leads to an increase in the interest rate and collateral obligations.
CREDIT operates within a market-oriented framework, where the smart contract dynamically sets the interest rate for fixed term deposits and loans, as well as the minimum collateral required for borrowers. The algorithm is sensitive to the prevailing market conditions and adjusts these vital parameters accordingly.
When the average pool interest rate deviates above the market interest rate or when the required minimum locked collateral exceeds the market collateral requirement, pools become more appealing for lenders. In response, arbitrage-oriented lenders actively engage in the pool, initiating transactions that adjust the asset pool, the collateral factor, and the interest rate. This process reduces the average interest rate and minimum collateral required by borrowers, aligning these figures with the current market rates.
On the other end, when the average interest rate in the pool falls below the market interest rate, pools become attractive for borrowers. Arbitrage-seeking borrowers respond by borrowing from the pool, triggering transactions that adjust the principal, collateral factor, and interest rate. This action increases the average interest rate and the minimum collateral required, aligning them effectively with market expectations.
Through this dynamic transactional interaction, the protocol seeks to align the average interest rate more closely with the prevailing market rate and adjusts the required minimum collateral to match the market standards. This market-responsive mechanism guarantees a flexible environment for the adjustment of interest rates and collateral requirements within the protocol. Provided enough volume it also provides the broader DeFi ecosystem with a purely unbiased rate oracle, similar to Uniswap TWAP.
To maintain accurate records of users' positions, balances are tracked per NFT ID. This allows the system to accurately reflect the position associated with each NFT. In light of this, we have named this mechanism the CreditPosition.
The Credit Position NFT, integral to the CREDIT protocol, signifies a user's position within the lending pool. It has three specific types, each correlating with a different role - liquidity providers, borrowers (debt), and lenders (credit).
The Credit Position NFT natively represents users’ positions. This flexibility adds another layer of versatility to user positions within the protocol and by interacting with the protocol using their NFT, users benefit from a simplified experience while engaging with the protocol.
In the context of the CREDIT protocol, the Debt Credit Position NFT represents the position of a borrower in the lending pool. It encapsulates two critical components:
The Debt: This represents the borrowed amount that the borrower needs to repay. It also includes the interest that accrues over time until repayment or expiry.
The Collateral: This is the asset provided by the borrower as security against the loan. The collateral serves to mitigate the risk to the lender, and it may be liquidated in the event of a default by the borrower.
Lenders in the Credit protocol receive a loan corresponding to the lent amount, along with the interest accrued over the loan period. This is encapsulated within the CREDIT Credit Position NFT. Furthermore, in a scenario where the borrower defaults, the lenders also receive coverage to mitigate their risk. This coverage claim, along with the loan and interest, are all represented within the same Credit Position NFT.
The Credit Position NFT serves to encapsulate the lender's stake within the CREDIT protocol. Its key components include:
Loan: This signifies the original amount that the lender has provided to the lending pool. Essentially, it's the principal amount of the loan that they've extended to borrowers within the pool.
Interest: This constitutes the return that the lender earns over the loan period. It accumulates over time based on the interest rate agreed upon at the time of lending.
Coverage: This represents the safety net provided to the lender in case of borrower default. If a borrower fails to repay their debt, this coverage comes into play to cover the lender's losses.
In the CREDIT protocol, borrowers have the option to repay their debt prior to the loan's expiry date. However, as rational participants, they would only choose to do so if the value of their collateral exceeds the amount of their debt.
This is because, if the collateral's worth is greater than the debt, it is economically beneficial for the borrower to repay the debt and reclaim the collateral. Conversely, if the debt exceeds the collateral's value, a rational borrower would likely choose to default on the debt, given that the loss would be less than the value of the debt itself.
Thus, the decision of early repayment by borrowers in the CREDIT protocol is driven by the relative values of the debt and the collateral, a dynamic that underscores the importance of market conditions and asset valuation within the protocol.
Upon the expiration of a pool in the CREDIT protocol, all lending and borrowing activities cease and it's time for settlement. This is the point at which Liquidity Providers (LPs) can withdraw their liquidity. LPs burn their Liquidity Tokens to reclaim their assets and collateral. For instance, if you hold 10% of all the Liquidity Tokens, you are entitled to claim 10% of the asset and collateral tokens remaining in the pool, after the lenders' share has been distributed.
When a Credit pool reaches expiry, there are two parties awaiting to redeem their capital from the pool: Lenders and Liquidity Providers. The CREDIT protocol is designed such that lenders are prioritized to claim the assets first, and then LPs can claim the remaining assets. This structuring is known as Tranching. In this arrangement, lenders function as a Senior Tranche, and LPs act as Junior Tranches, meaning LPs claim their share only after lenders.
This structure is crucial because CREDIT loans are non-liquidatable, and some borrowers might default. In such scenarios, a pool might contain fewer assets (repaid by borrowers) compared to liabilities (owed to lenders). The remaining liabilities are compensated for using the borrowers' collateral. Consequently, there might be situations where LPs receive only collateral from the pool, particularly if lenders claim all the Asset tokens left after a high number of defaults.
For example:
Imagine a USDC-ETH pool that needs to repay 10,000 USDC, of which 7,000 is due to lenders and 3,000 to LPs. However, at expiry, there is only 9,000 USDC and 1 ETH in the pool. Lenders will be able to claim 7,000 USDC first, then LPs will proportionally share the remaining 2,000 USDC and 1 ETH.
A significant reason why LPs serve as Junior Tranche and not Senior Tranche is due to their role as market makers. This position allows LPs to create deeper liquidity even under unhealthy parameters to attract volume, such as in situations with very low Collateral Debt Position (CDP) or very high Annual Percentage Rate (APR), which could lead to bad debt and market imbalance. By being a Junior Tranche, LPs' incentives are better aligned towards creating a healthier market.
We designed the Credit Position system in way that enables flexibility of partial and multi-repayments. Users have the ability to partially repay their loans prior to the pools expiry. This added customizability allows for greater control and management of a loan position.
This means that if a user takes out a loan of 1000 ARB, they have the ability to repay back a portion of their loan and receive part of their collateral back at any given time before the pools expiry. Lenders benefit from this feature because it improves the user experience through a increased level of self management over their lending positions. Borrowers are also set to benefit from the feature because, over time more lenders will repay their debt in smaller portions over the course of the pool term. As a result, it reduces the default risk and lowers the chances of bad debt being incurred.
The mechanism for partial payments is also a powerful foundation for more sophisticated and complex position management. It opens the door for self repaying loans, as well as the ability to offer multi-repayments, where users can repay their outstanding debt on multiple positions at once, in one smooth transaction. The CREDIT protocol will allow deploy this added functionality for self repaying loans and multi-repayments shortly after the launch on our customized appchain Meliora.
The staking infrastructure is an integral part of our protocol, featuring a singular staking contract that allows for the staking of CREDIT tokens. It is designed to seamlessly work in conjunction with the various aspects of the protocol, including transaction fees and rewards generated by the respective pools, to offer users a unified and efficient staking experience.
The operational model for this mechanism is epoch-based, where each epoch spans over a duration of 30 days. The staking contract is designed to distribute any quantity of the three potential dividends tokens it accumulates: CREDIT, ARB, and ETH. This interaction between the staking contract and the protocol is indicative of the integral nature of the staking process in our protocol's ecosystem.
Flexibility is incorporated in the unstaking model, but it is structured to discourage early withdrawal through a scaled penalty system. The penalty for unstaking starts at 75% in the first week and gradually decreases to 50% and 25% in the second and third weeks, respectively. Stakers who hold their stakes until the fourth week can withdraw without incurring any penalties.
The CREDIT Protocol offers a nuanced and complex core product that is its fixed pools. These pools are fundamentally designed for investors who can demonstrate patience and have an intelligent understanding of their capital. It caters specifically to those with idle or passive capital, those who prefer a longer-term time preference, and those who are apt at employing smart money strategies.
The liquidity providers (LPs) essentially drive this engine. It is vital for the $CREDIT token to have profound liquidity for the ecosystem to function optimally. This stipulates a key requirement for the LPs - they should not only possess a profound understanding of the system but also demonstrate a degree of patience. The fixed pools are constructed to be more attractive to larger players such as funds, venture capitalists, market makers, Decentralized Autonomous Organizations (DAOs), whales, and various projects. They are the ones that match our core product thesis, and who might show interest in custom pools.
However, acknowledging the diverse range of players in the DeFi ecosystem, The CREDIT Protocol presents another offering, specifically targeted towards the retail market - Vaults. The Vaults are designed to be less complex and more accessible, providing a more familiar experience for individual or retail investors. Yet, they carry the bonus of being beneficial to larger parties as well, particularly by offering liquidity provider (LP) hedging options.
The $CREDIT token serves as the backbone of our platform, offering a range of functionalities and benefits to its holders.
The $CREDIT token mechanics offer participants the opportunity to capture platform fees, earn rewards through staking, participate in platform governance, and engage in a token auction. These mechanisms aim to incentivize participation, enhance returns, and give users a voice in shaping the future of the platform.
Primarily, $CREDIT allows holders AND LPs to capture a substantial 30% each of all platform fees, presenting an unprecedented opportunity to augment earnings. As a $CREDIT holder, you can harness its potential to maximize your financial rewards, setting a new benchmark for benefits provided by a platform's native token.
The token also empowers holders with rewards and control over staking. The unique feature of our staking system is that it gives token holders the freedom to control staking emission rates. This implies that $CREDIT can be utilized to earn rewards while also ensuring that your investment is working relentlessly to yield maximum returns.
Another pivotal advantage of $CREDIT pertains to platform governance. By holding $CREDIT, you have the power to shape the future of the platform. Our vision is to create an ecosystem where decision-making power is distributed, and the $CREDIT token is the instrument to achieve this. Token holders will eventually have the ability to vote on crucial aspects such as the rebate percentage, fee division, establishment of new pools, and the launch of innovative products.
As a lender, what are some of the benefits CREDIT offers me?
Focus on a single token to reduce counterparty risk.
Include exposure to emerging tokens, and expanding investment portfolios.
Support early-stage projects without equity investments through debt financing 4. Generate interest through stablecoins and wrapped NFTs.
Leverage arbitrage opportunities using other lending and borrowing protocols.
As a borrower, what are some of the benefits CREDIT offers me?
Gain liquidity for any ERC-20 token and mitigate price volatility risks.
Utilize wrapped NFTs as collateral.
Borrow tokens for staking in other protocols and exploit arbitrage opportunities.
Open short positions without liquidation risks.
Borrow LP tokens for yield farming and open short positions without liquidation risks. 6. Access short-term liquidity while retaining token ownership.
Opt for loans instead of equity funding to support early-stage projects.
Obtain loans by securing them with LP tokens
Manage cash flows with fixed-term loans and borrow stablecoins to hedge risks.
As a liquidity provider, what are the benefits CREDIT offers me?
Stake your LP tokens and earn 30% of platform fees and $CREDIT emissions. 2. Access leverage by looping your LP tokens.
Avoid liquidation risk while shorting LP tokens.
Expand investment exposure by diversifying liquidity across multiple pools. 5. Contribute to lending ecosystem stability and effectiveness.
Earn transaction fees and generate income through liquidity provision. 7. Minimize impermanent loss with careful liquidity provisioning.
Lend and borrow within LP pair pools.
Provide collateral using LP tokens from various protocols.
AND MORE…
In the coming days we will be onboarding the first cohort of beta testers for The CREDIT Protocol and the Meliora Appchain. Stay tuned by following our socials!
The CREDIT Protocol is a modular and composable omnichain fixed-income platform that not only serves as a powerful foundation for credit/fixed-income-based products but also functions as a fixed-rate and isolated borrowing and lending platform.
Native to its own dedicated Arbitrum Orbit Appchain “Meliora”; CREDIT eliminates reliance on oracles and liquidations, enhancing stability and transparency, which are often lacking in the DeFi ecosystem.
By offering dynamic determination of interest rates and collateral factors based on market reactions, as well as customizable risk parameters, support for illiquid, volatile, and long-tail assets, and more - CREDIT provides robust infrastructure for secure and efficient lending activities.
With its versatile design, The CREDIT Protocol empowers users to optimize capital utilization, manage risk effectively, and benefit from market diversity. Additionally, it enables developers to experiment with yield curves and expand the DeFi fixed-income/credit market with ease.
Borrowing and Lending AMM
The CREDIT Protocol provides an Automated Market Maker (AMM) platform specifically designed for borrowing and lending purposes.
Oracleless Architecture
By eliminating the reliance on pricing oracles, The CREDIT Protocol significantly reduces risks and potential attack vectors, ensuring a more secure ecosystem.
No Liquidations
Users are not subjected to volatility-induced collateral liquidations. They only need to repay their outstanding debt before the agreed term ends for the lending pool.
Fixed-term Borrowing and Lending
Borrowers can select a specific pool and agree upon the duration of the loan term, providing clarity and predictability to both borrowers and lenders.
Fixed-Rate Structure
Borrowers and lenders can establish a fixed interest rate at the initiation of the loan, which remains constant throughout the loan term, ensuring stability and transparency.
Ecosystem and Partners
The CREDIT Protocol offers treasury management solutions through borrowing and lending and custom pools or vaults - enabling seamless integration with partner platforms.
$CREDIT Token Rebates
In the event of debt defaults, LPs can receive rebates in the form of $CREDIT tokens, fostering a fair and incentivized lending environment.
Liquidity Incentives for LPs
Liquidity Providers (LPs) can earn yield through the CREDIT Protocol by participating in liquidity pools and benefitting from attractive incentives.
Composable Credit Base Layer
The CREDIT Protocol serves as a foundation for more advanced financial products, allowing the development of sophisticated offerings such as our own Automated Strategy Vaults.
Sophisticated Liquidity Provisioning
Liquidity providers can access more advanced options for offering liquidity, enhancing their ability to participate in the ecosystem.
Arbitrage Opportunities
Credit pools within The CREDIT Protocol offer opportunities for arbitrage by capitalizing on interest and collateral imbalances, creating favorable trading conditions.
Maker, Aave, and Compound have paved the way for collateralized money markets, accumulating over $40 billion in locked value within these protocols. While these platforms have successfully established robust financial markets, there is always room for improvement, diversity, and enhancement.
Oracles play a pivotal role in the functioning of lending protocols by acting as intermediaries that provide off-chain data to the blockchain or supply on-chain data to other participants. This data can include token prices, interest rates, or various other market metrics. As DeFi projects heavily rely on oracles to execute logic within their smart contracts, it is crucial to choose oracles that are resistant to manipulation by potential bad actors.
However, despite their critical role, oracles have often been the weak link in the security of DeFi protocols, leading to significant financial losses.
The recurring nature of these incidents highlights the current limitations of price oracles. Although various oracle solutions are currently available, they are either not fully decentralized or, if they are, they remain susceptible to manipulation. Consequently, despite ongoing efforts to develop more robust oracle solutions, the existing offerings continue to pose potential risks for DeFi projects. The issues surrounding oracle security underscore the need for more reliable, manipulation-resistant oracle solutions in the DeFi ecosystem.
Traditional DeFi lending platforms put borrowers at risk by liquidating collateral if its value falls below a specific threshold. This practice creates fear and instability, potentially leading to unfair asset seizures and hindering the growth of the DeFi ecosystem.
The CREDIT Protocol addresses this issue by eliminating collateral liquidations entirely. Borrowers using The CREDIT Protocol are not subjected to the seizure of their collateral if its value decreases. Instead, they only need to repay their outstanding debt before the agreed term ends for the lending pool. By removing the risk of collateral liquidations, The CREDIT Protocol empowers borrowers to leverage their assets effectively and participate more actively in DeFi lending.
This approach fosters a forgiving and user-friendly borrowing experience, instilling trust, stability, and fairness in the lending ecosystem.
In most existing DeFi lending platforms, the fluctuation of interest rates poses a significant challenge for lenders. Calculating returns over time becomes complex due to the volatility, creating uncertainty and hindering the ability to achieve stability and predictability in investments. The absence of fixed interest rates introduces ambiguity, making it difficult for lenders to make well-informed investment decisions.
The CREDIT Protocol revolutionizes this aspect by introducing fixed rates and fixed terms, offering a unique solution to address the challenges faced by lenders. With The CREDIT Protocol, users can enjoy the benefits of a fixed interest rate that remains unchanged throughout the duration of the loan. This stability and predictability provide users with a clear understanding of the interest they will earn from their investments, ensuring a transparent and consistent lending experience.
The CREDIT Protocol is driven purely by market forces. Yes, we have fixed rates that are ‘locked in’ i.e. taken by every individual position, but are not universal, they represent the current market demand when the position is taken- they are unique positions and function as a price/rate discovery mechanism. All variables in the algorithm, such as Interest Rate, collateral factor and borrow limit dynamically change based on activity in the accompanying pool. Every interaction will make the needles move allowing for market exploration. A “hybrid” model this way, the best of both worlds.
By eliminating the uncertainty associated with fluctuating interest rates, the CREDIT Protocol empowers users to calculate their returns accurately and make more informed investment decisions. Lenders can have confidence in their investment strategy, knowing that their expected returns will remain steady throughout the loan period. This feature not only enhances user trust and satisfaction but also encourages greater participation and engagement within the lending ecosystem.
The introduction of dynamic fixed rates and fixed terms through the CREDIT Protocol marks a significant advancement in DeFi lending, as it provides users with a reliable and predictable framework for their investments. By promoting stability and transparency, The CREDIT Protocol sets a new standard for lending platforms and contributes to the overall growth and maturation of the DeFi ecosystem.
Existing DeFi lending platforms primarily focus on supporting highly liquid assets, which excludes a significant portion of the market consisting of volatile, long-tail, and illiquid assets. This limited asset selection restricts investment opportunities and narrows the scope of the DeFi ecosystem, preventing users from fully utilizing their holdings.
The limited availability of asset options in traditional lending platforms has several implications. Firstly, it hampers the growth and adoption of these assets by restricting the liquidity options available to asset holders. Secondly, it reduces investment opportunities for users who hold such assets, limiting their ability to maximize returns and diversify their portfolios. Lastly, it creates a barrier to entry for innovative projects and tokens that do not fit within the framework of highly liquid assets.
The CREDIT Protocol addresses this issue by providing a solution that allows for the creation of new pools for any ERC20 token, including volatile, long-tail, illiquid assets, LP tokens, wrapped NFTs and Social Tokens. By facilitating borrowing and lending activities involving these assets, The CREDIT Protocol unlocks opportunities for users to leverage their holdings, access liquidity, and earn yield on a more diverse range of tokens.
This expanded asset selection opens up new possibilities for users, enabling them to tap into the potential of previously underserved assets. It promotes a more inclusive and vibrant DeFi ecosystem by accommodating a wider range of tokens, fostering innovation, and providing users with greater flexibility in managing their investments. With The CREDIT Protocol, users can explore investment opportunities beyond the highly liquid assets, diversify their portfolios, and participate more actively in the evolving landscape of decentralized finance.
Existing DeFi lending platforms often lack options for borrowers and lenders to customize their risk profiles according to their specific needs. This lack of customization restricts users from aligning their borrowing and lending activities with their risk tolerance and investment strategies. Consequently, users may have to compromise on their preferred risk-return tradeoff, leading to suboptimal decision-making.
Tailored risk profiles are essential for users as they enable them to align their borrowing and lending activities with their risk tolerance and investment strategies. By offering the ability to customize risk exposure, users can optimize their portfolio management, diversify their investments, and mitigate potential losses. Moreover, tailored risk profiles enhance user confidence and satisfaction by providing a more personalized and flexible lending experience.
The CREDIT Protocol effectively addresses this issue by offering increased control and versatility in tailoring risk profiles. Users can select specific pools with time parameters that match their risk appetite, and they can adjust their interest and collateral parameters to an unparalleled degree. Additionally, users have the flexibility to establish a fixed interest rate at the initiation of the loan, which remains constant throughout the loan term. This feature empowers users to manage their expectations and plan their finances with greater certainty.
With the ability to customize risk profiles, users can fine-tune their borrowing and lending activities to align with their specific goals and risk tolerance. This level of customization opens up opportunities for users to optimize their returns while effectively managing and mitigating risks. The CREDIT Protocol sets a new standard in risk customization within the DeFi lending space, empowering users to make informed decisions and tailor their lending activities according to their individual preferences.
Meliora is a user-centric appchain focused on building a robust ecosystem of tailored applications enabling seamless and complexity-abstracted interaction with open money markets.
By leveraging the Arbitrum Orbit rollup stack, we can achieve greater customization and better performance. The CREDIT protocol acts as a foundational layer, which paves the way for us to develop a variety of DApps and create a more comprehensive ecosystem.
High throughput and lower transaction fees are key attributes of Meliora, aligning with Volatilis' vision to reshape finance. As the primary platform for The CREDIT Protocol, Meliora fosters seamless operations across our DApp ecosystem.
Utilizing the rollup chain's benefits, Meliora ensures fast, cost-effective transaction processing. This not only improves user experience but also opens up new revenue opportunities.
The CREDIT protocol functions as a factory contract that generates pair contracts for any combination of ERC20 tokens. These pairs consist of an asset and its corresponding collateral. The factory contract operates in a permissionless manner, allowing any user to create a pair using their selected assets.
Interactions with the CREDIT protocol are facilitated through a dedicated router contract. This router contract simplifies the process by abstracting the underlying complexities associated with direct interaction with the pair contract. It incorporates various protective mechanisms known as "guardrails" that mitigate the risk of errors and safeguard users from potential threats.
The CREDIT protocol caters to three distinct types of users:
Lenders: Lenders, who generally have a lower time preference for their tokens and seek minimal risk, utilize the protocol to earn yield by lending their tokens in a fixed-income environment. They also acquire coverage, which provides claims to the collateral of defaulting borrowers. This feature enables each lender to manage the balance between default risk and potential yield.
Borrowers: Borrowers, on the other hand, typically have a higher time preference for tokens. They may require tokens for immediate use, futures trading, leveraging their collateral, or shorting. Borrowers utilize the protocol to obtain loans with a fixed yield, backed by their collateral. The collateral will only be liquidated and allocated to lenders if the borrower chooses not to repay their debt before expiry.
Liquidity Providers: Liquidity providers play a vital role in the protocol as they provide tokens to the pool, creating markets for both lending and borrowing transactions. They profit from the spread between lenders and borrowers, which is determined by the volume and size of transactions within the pools.
Positions within a pool are represented by an ERC721 token called the CREDIT Position. This token serves as a digital marker, encapsulating and tracking individual user positions. There are three distinct types of CREDIT Positions: Debt, Credit, and Liquidity, each corresponding to different user roles within the ecosystem.
These CREDIT Positions allow associated users to monitor, manage, and retrieve information specific to their positions within the protocol. By categorizing positions into these types, The CREDIT protocol delivers a personalized, transparent, and efficient user experience.
Notably, the protocol does not rely on price feeds or oracles because liquidation is based on the borrower's decisions, assuming rational behavior. As the pool's expiry approaches, borrowers are more likely to repay their debt if the value of their locked collateral exceeds the debt value. Conversely, if the collateral value is lower than the debt value, borrowers are more likely to default.
The CREDIT AMM relies on three variables. The interaction among these variables directly influences the interest rate and the necessary collateral factor for participation in the liquidity pools. This approach allows the protocol to function independently of oracles and liquidations, providing a robust and secure environment.
For instance, an increase in asset lending into the pool results in a decrease in both the interest rate and the collateral factor. However, the borrowing of more assets from the pool leads to an increase in the interest rate and collateral obligations.
CREDIT operates within a market-oriented framework, where the smart contract dynamically sets the interest rate for fixed term deposits and loans, as well as the minimum collateral required for borrowers. The algorithm is sensitive to the prevailing market conditions and adjusts these vital parameters accordingly.
When the average pool interest rate deviates above the market interest rate or when the required minimum locked collateral exceeds the market collateral requirement, pools become more appealing for lenders. In response, arbitrage-oriented lenders actively engage in the pool, initiating transactions that adjust the asset pool, the collateral factor, and the interest rate. This process reduces the average interest rate and minimum collateral required by borrowers, aligning these figures with the current market rates.
On the other end, when the average interest rate in the pool falls below the market interest rate, pools become attractive for borrowers. Arbitrage-seeking borrowers respond by borrowing from the pool, triggering transactions that adjust the principal, collateral factor, and interest rate. This action increases the average interest rate and the minimum collateral required, aligning them effectively with market expectations.
Through this dynamic transactional interaction, the protocol seeks to align the average interest rate more closely with the prevailing market rate and adjusts the required minimum collateral to match the market standards. This market-responsive mechanism guarantees a flexible environment for the adjustment of interest rates and collateral requirements within the protocol. Provided enough volume it also provides the broader DeFi ecosystem with a purely unbiased rate oracle, similar to Uniswap TWAP.
To maintain accurate records of users' positions, balances are tracked per NFT ID. This allows the system to accurately reflect the position associated with each NFT. In light of this, we have named this mechanism the CreditPosition.
The Credit Position NFT, integral to the CREDIT protocol, signifies a user's position within the lending pool. It has three specific types, each correlating with a different role - liquidity providers, borrowers (debt), and lenders (credit).
The Credit Position NFT natively represents users’ positions. This flexibility adds another layer of versatility to user positions within the protocol and by interacting with the protocol using their NFT, users benefit from a simplified experience while engaging with the protocol.
In the context of the CREDIT protocol, the Debt Credit Position NFT represents the position of a borrower in the lending pool. It encapsulates two critical components:
The Debt: This represents the borrowed amount that the borrower needs to repay. It also includes the interest that accrues over time until repayment or expiry.
The Collateral: This is the asset provided by the borrower as security against the loan. The collateral serves to mitigate the risk to the lender, and it may be liquidated in the event of a default by the borrower.
Lenders in the Credit protocol receive a loan corresponding to the lent amount, along with the interest accrued over the loan period. This is encapsulated within the CREDIT Credit Position NFT. Furthermore, in a scenario where the borrower defaults, the lenders also receive coverage to mitigate their risk. This coverage claim, along with the loan and interest, are all represented within the same Credit Position NFT.
The Credit Position NFT serves to encapsulate the lender's stake within the CREDIT protocol. Its key components include:
Loan: This signifies the original amount that the lender has provided to the lending pool. Essentially, it's the principal amount of the loan that they've extended to borrowers within the pool.
Interest: This constitutes the return that the lender earns over the loan period. It accumulates over time based on the interest rate agreed upon at the time of lending.
Coverage: This represents the safety net provided to the lender in case of borrower default. If a borrower fails to repay their debt, this coverage comes into play to cover the lender's losses.
In the CREDIT protocol, borrowers have the option to repay their debt prior to the loan's expiry date. However, as rational participants, they would only choose to do so if the value of their collateral exceeds the amount of their debt.
This is because, if the collateral's worth is greater than the debt, it is economically beneficial for the borrower to repay the debt and reclaim the collateral. Conversely, if the debt exceeds the collateral's value, a rational borrower would likely choose to default on the debt, given that the loss would be less than the value of the debt itself.
Thus, the decision of early repayment by borrowers in the CREDIT protocol is driven by the relative values of the debt and the collateral, a dynamic that underscores the importance of market conditions and asset valuation within the protocol.
Upon the expiration of a pool in the CREDIT protocol, all lending and borrowing activities cease and it's time for settlement. This is the point at which Liquidity Providers (LPs) can withdraw their liquidity. LPs burn their Liquidity Tokens to reclaim their assets and collateral. For instance, if you hold 10% of all the Liquidity Tokens, you are entitled to claim 10% of the asset and collateral tokens remaining in the pool, after the lenders' share has been distributed.
When a Credit pool reaches expiry, there are two parties awaiting to redeem their capital from the pool: Lenders and Liquidity Providers. The CREDIT protocol is designed such that lenders are prioritized to claim the assets first, and then LPs can claim the remaining assets. This structuring is known as Tranching. In this arrangement, lenders function as a Senior Tranche, and LPs act as Junior Tranches, meaning LPs claim their share only after lenders.
This structure is crucial because CREDIT loans are non-liquidatable, and some borrowers might default. In such scenarios, a pool might contain fewer assets (repaid by borrowers) compared to liabilities (owed to lenders). The remaining liabilities are compensated for using the borrowers' collateral. Consequently, there might be situations where LPs receive only collateral from the pool, particularly if lenders claim all the Asset tokens left after a high number of defaults.
For example:
Imagine a USDC-ETH pool that needs to repay 10,000 USDC, of which 7,000 is due to lenders and 3,000 to LPs. However, at expiry, there is only 9,000 USDC and 1 ETH in the pool. Lenders will be able to claim 7,000 USDC first, then LPs will proportionally share the remaining 2,000 USDC and 1 ETH.
A significant reason why LPs serve as Junior Tranche and not Senior Tranche is due to their role as market makers. This position allows LPs to create deeper liquidity even under unhealthy parameters to attract volume, such as in situations with very low Collateral Debt Position (CDP) or very high Annual Percentage Rate (APR), which could lead to bad debt and market imbalance. By being a Junior Tranche, LPs' incentives are better aligned towards creating a healthier market.
We designed the Credit Position system in way that enables flexibility of partial and multi-repayments. Users have the ability to partially repay their loans prior to the pools expiry. This added customizability allows for greater control and management of a loan position.
This means that if a user takes out a loan of 1000 ARB, they have the ability to repay back a portion of their loan and receive part of their collateral back at any given time before the pools expiry. Lenders benefit from this feature because it improves the user experience through a increased level of self management over their lending positions. Borrowers are also set to benefit from the feature because, over time more lenders will repay their debt in smaller portions over the course of the pool term. As a result, it reduces the default risk and lowers the chances of bad debt being incurred.
The mechanism for partial payments is also a powerful foundation for more sophisticated and complex position management. It opens the door for self repaying loans, as well as the ability to offer multi-repayments, where users can repay their outstanding debt on multiple positions at once, in one smooth transaction. The CREDIT protocol will allow deploy this added functionality for self repaying loans and multi-repayments shortly after the launch on our customized appchain Meliora.
The staking infrastructure is an integral part of our protocol, featuring a singular staking contract that allows for the staking of CREDIT tokens. It is designed to seamlessly work in conjunction with the various aspects of the protocol, including transaction fees and rewards generated by the respective pools, to offer users a unified and efficient staking experience.
The operational model for this mechanism is epoch-based, where each epoch spans over a duration of 30 days. The staking contract is designed to distribute any quantity of the three potential dividends tokens it accumulates: CREDIT, ARB, and ETH. This interaction between the staking contract and the protocol is indicative of the integral nature of the staking process in our protocol's ecosystem.
Flexibility is incorporated in the unstaking model, but it is structured to discourage early withdrawal through a scaled penalty system. The penalty for unstaking starts at 75% in the first week and gradually decreases to 50% and 25% in the second and third weeks, respectively. Stakers who hold their stakes until the fourth week can withdraw without incurring any penalties.
The CREDIT Protocol offers a nuanced and complex core product that is its fixed pools. These pools are fundamentally designed for investors who can demonstrate patience and have an intelligent understanding of their capital. It caters specifically to those with idle or passive capital, those who prefer a longer-term time preference, and those who are apt at employing smart money strategies.
The liquidity providers (LPs) essentially drive this engine. It is vital for the $CREDIT token to have profound liquidity for the ecosystem to function optimally. This stipulates a key requirement for the LPs - they should not only possess a profound understanding of the system but also demonstrate a degree of patience. The fixed pools are constructed to be more attractive to larger players such as funds, venture capitalists, market makers, Decentralized Autonomous Organizations (DAOs), whales, and various projects. They are the ones that match our core product thesis, and who might show interest in custom pools.
However, acknowledging the diverse range of players in the DeFi ecosystem, The CREDIT Protocol presents another offering, specifically targeted towards the retail market - Vaults. The Vaults are designed to be less complex and more accessible, providing a more familiar experience for individual or retail investors. Yet, they carry the bonus of being beneficial to larger parties as well, particularly by offering liquidity provider (LP) hedging options.
The $CREDIT token serves as the backbone of our platform, offering a range of functionalities and benefits to its holders.
The $CREDIT token mechanics offer participants the opportunity to capture platform fees, earn rewards through staking, participate in platform governance, and engage in a token auction. These mechanisms aim to incentivize participation, enhance returns, and give users a voice in shaping the future of the platform.
Primarily, $CREDIT allows holders AND LPs to capture a substantial 30% each of all platform fees, presenting an unprecedented opportunity to augment earnings. As a $CREDIT holder, you can harness its potential to maximize your financial rewards, setting a new benchmark for benefits provided by a platform's native token.
The token also empowers holders with rewards and control over staking. The unique feature of our staking system is that it gives token holders the freedom to control staking emission rates. This implies that $CREDIT can be utilized to earn rewards while also ensuring that your investment is working relentlessly to yield maximum returns.
Another pivotal advantage of $CREDIT pertains to platform governance. By holding $CREDIT, you have the power to shape the future of the platform. Our vision is to create an ecosystem where decision-making power is distributed, and the $CREDIT token is the instrument to achieve this. Token holders will eventually have the ability to vote on crucial aspects such as the rebate percentage, fee division, establishment of new pools, and the launch of innovative products.
As a lender, what are some of the benefits CREDIT offers me?
Focus on a single token to reduce counterparty risk.
Include exposure to emerging tokens, and expanding investment portfolios.
Support early-stage projects without equity investments through debt financing 4. Generate interest through stablecoins and wrapped NFTs.
Leverage arbitrage opportunities using other lending and borrowing protocols.
As a borrower, what are some of the benefits CREDIT offers me?
Gain liquidity for any ERC-20 token and mitigate price volatility risks.
Utilize wrapped NFTs as collateral.
Borrow tokens for staking in other protocols and exploit arbitrage opportunities.
Open short positions without liquidation risks.
Borrow LP tokens for yield farming and open short positions without liquidation risks. 6. Access short-term liquidity while retaining token ownership.
Opt for loans instead of equity funding to support early-stage projects.
Obtain loans by securing them with LP tokens
Manage cash flows with fixed-term loans and borrow stablecoins to hedge risks.
As a liquidity provider, what are the benefits CREDIT offers me?
Stake your LP tokens and earn 30% of platform fees and $CREDIT emissions. 2. Access leverage by looping your LP tokens.
Avoid liquidation risk while shorting LP tokens.
Expand investment exposure by diversifying liquidity across multiple pools. 5. Contribute to lending ecosystem stability and effectiveness.
Earn transaction fees and generate income through liquidity provision. 7. Minimize impermanent loss with careful liquidity provisioning.
Lend and borrow within LP pair pools.
Provide collateral using LP tokens from various protocols.
AND MORE…
In the coming days we will be onboarding the first cohort of beta testers for The CREDIT Protocol and the Meliora Appchain. Stay tuned by following our socials!
No activity yet