Lending & Borrowing

Thrupenny lending and borrowing protocol offers a secure and efficient way for users to access funds and earn interest on their digital assets. With a variety of mainstream assets supported, transparent transactions, and a fair and competitive interest rate, the Thrupenny lending and borrowing protocol is a valuable addition to any digital asset portfolio. In addition to $TPY, Users have the ability to lend and borrow a variety of mainstream digital assets such as BTC, ETH, USDT and USDC.

1. Introduction to the Financial Model

Thrupenny Protocol incorporates a robust and sophisticated financial model that empowers decentralized finance applications. This section introduces key variables, equations, and mechanisms that govern the liquidity management, interest rate adaptation, user interactions, loan health, and overall functionality of the protocol.

2. Liquidity Management

Liquidity plays a vital role in our platform, as it ensures seamless transactions and contributes to the overall stability of the system. The total liquidity of an asset represents the available funds within the reserve and varies depending on the currency's decimals. This liquidity is dynamically managed, reflecting the ongoing borrowing, depositing, redeeming, and repayment activities, thus ensuring the constant availability of funds for users and maintaining market efficiency.

2.1 Asset Liquidity

  • L_asset_t: Total Liquidity of an Asset

  • U_asset_t: Utilisation Rate

    • If L_asset_t = 0, then U_asset_t = 0

    • If L_asset_t > 0, then U_asset_t = D_asset_t / L_asset_t

2.2 Time Factors

  • T: Current Timestamp

  • Tl: Last Updated Timestamp

  • ΔT: Delta Time = T - Tl

  • T_year: Seconds in a Year = 31536000

  • ΔT_year: Yearly Period = ΔT / T_year

3. Interest Rate Mechanisms

Interest rates within our protocol are meticulously calculated to adapt to market demands. The borrow rate, comprised of a base rate plus a scaled slope according to the utilisation rate, operates differently depending on whether the utilisation rate is below or above a predetermined optimal target. The variable rate and stable rate borrow options allow users flexibility, with rates updated continuously based on real-time data. This responsive mechanism ensures that interest rates are fair, transparent, and aligned with prevailing market conditions.

3.1 Debt Tokens and Borrow Rates

  • SD_asset_t: Total Stable Debt Token

  • VD_asset_t: Total Variable Debt Tokens

  • D_asset_t: Total Debt = VD_asset_t + SD_asset_t

  • R_asset_t: Borrow Rate

    • If U_asset_t < U_asset_optimal, R_asset_t = R_asset_base + (U_asset_t / U_asset_optimal) * R_asset_slope1

    • If U_asset_t ≥ U_asset_optimal, R_asset_t = R_asset_base + R_asset_slope1 + (U_asset_t - U_optimal) / (1 - U_optimal) * R_asset_slope2

3.2 Variable and Stable Rates

  • VR_asset_t: Variable Rate

  • SR_asset_t: Stable Rate

4. Credit Scoring System

Our platform also includes a credit scoring system which allows users to assess the creditworthiness of potential borrowers before lending to them. This helps to mitigate risk for lenders and ensures that only creditworthy borrowers are able to access funds. The credit scoring system takes into account various factors such as the borrower's credit history, the value of the collateral, and the borrower's reputation on the platform. Users are able to view the credit score of potential borrowers before lending to them, allowing them to make informed decisions about who to lend to.

5. User Interaction and Borrowing Mechanism

Our platform's user-centric design enables ease of interaction and customized borrowing experiences. Users can open borrow positions with either stable or variable rates, with the balance and interest compounding each time a new transaction occurs. Additionally, each user's overall stable rate is calculated across multiple loans, offering a personalized and dynamic lending experience.

5.1 Collateral-Based Lending System

On the Thrupenny platform, borrowers are required to provide collateral in the form of digital assets as a guarantee for the loan. This ensures that the loan is secured and reduces risk for the lender. The platform uses a collateralization ratio, which is the ratio of collateral to loan value, to determine the amount of collateral needed for the loan. The collateralization ratio is set to ensure that the value of the collateral is always greater than the value of the loan, providing an added layer of security for the lender. The platform also allows for the use of multiple types of collateral, providing borrowers with flexibility in terms of the assets they can use as collateral.

5.2 The system's scalability and versatility contribute to a sophisticated borrowing environment tailored to individual user needs

  • PB(x): User Principal Borrow Balance

  • SD_asset_t(x): Stable Debt Balance per Asset of User x

    • SDt(x) = SBt(x) * (1 + SRt / T_year)

  • VDt(x): Variable Debt Balance of User x

    • VNt(x) = (1 + VRt / T_year) * ΔT(x) * VIt-1(x)

6. Loan Health and Liquidation

The Thrupenny platform includes a liquidation mechanism that automatically sells the collateral of a borrower if the value of the collateral falls below a certain threshold, known as the maintenance margin. This helps to protect the lender's assets and ensures that the loan is repaid even in the event of a market downturn. The liquidation mechanism ensures that the value of the collateral remains greater than the value of the loan, providing an added layer of security for the lender. The liquidation process is also fully automated, ensuring that it is executed quickly and efficiently.

A health factor is utilized to evaluate the collateralization level of a loan, with loans considered under-collateralized if the health factor falls below 1. In such cases, liquidation procedures can be triggered to safeguard the platform's integrity. This methodology prioritizes the protection of users' assets, providing a secure and stable environment for financial activities.

  • HF: Health Factor

    • HF = Collateral_in_ETH_asset * LT_asset / (CBx + TotalFeesETH)

7. Cumulative Indices and Interest Accumulation

The interest rate for lending and borrowing on the Thrupenny platform is determined by the supply and demand of the assets on the platform. The platform uses an adaptive rate mechanism to ensure that the interest rate remains competitive and fair for both lenders and borrowers. This mechanism takes into account the supply and demand of the assets, as well as the collateralization ratio to determine the interest rate. As the demand for a particular asset increases, the interest rate for borrowing that asset will also increase, making it more attractive for lenders to provide loans, thus keeping the interest rate fair and competitive.

Interest accumulation is managed through cumulative indices, with a liquidity index reflecting the reserve's interest over time, and a variable borrow index for the accumulated interest on variable borrows. These indices are updated at each significant event, ensuring precise and real-time calculations. These measures ensure transparency in the interest computation process and maintain the integrity of the financial system.

  • LIt: Cumulated Liquidity Index

    • LIt = (LRt * ΔT_year + 1) * LIt-1, where LI0 = 1 ray

  • NIt: Reserve Normalized Income

    • NIt = (LRt * ΔT_year + 1) * LIt-1

  • aB(x): User aToken Balance

    • aB(x) = ScB(x)_t-1 * NIt

8. Integration with Existing Features

The latest enhancements to our financial model are intricately woven into our platform's existing architecture. Whether it's the liquidity management system or the multi-faceted interest rate mechanism, every component is designed to interoperate seamlessly with existing features. This integration ensures a unified user experience, upholding our commitment to innovation, efficiency, and robustness.

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