For Borrowers & Farmers
Phase 1: Feasibility & Capacity Analysis
User Intent: Determine if the protocol can support the target strategy size and complexity.
"What constrains position size?"
Liquidity & Exposure Limits. Capacity is bounded by two distinct factors: 1) Global liquidity availability in the Pool, and 2) Strategy-specific Debt Ceilings defined by the Curator.
"What are the primary risk vectors?"
Risk Vector Identification. Borrowers face three primary threats: 1) Market Risk (Collateral volatility), 2) Rate Risk (Utilization-driven cost spikes), and 3) Liquidity Risk (Inability to exit via external DEX liquidity).
"Is the target collateral eligible?"
Collateral Allowlist. Each Credit Manager enforces a strict allowlist of assets. Tokens not explicitly whitelisted cannot be held within the Credit Account.
Phase 2: Cost of Carry Modeling
User Intent: Model the dynamic cost of capital to project net yield and volatility exposure.
"What drives the base rate?"
Interest Rate Model. Rates are dynamic and determined by Pool Utilization. Large withdrawals by LPs can cause immediate utilization spikes, increasing the cost of capital.
"Are there asset-specific premiums?"
Quota Rates. Illiquid or high-volatility collateral assets may carry an additional interest premium (Quota Rate) imposed by the Quota Keeper, independent of the base pool rate.
"What is the protocol take rate?"
Interest Fee. The Curator and DAO capture a fixed percentage of the interest paid. This markup is additive to the base rate paid to LPs.
Phase 3: Solvency & Liquidation Mechanics
User Intent: Define the liquidation boundary and the economic consequences of insolvency.
"What triggers liquidation?"
Liquidation Triggers. Insolvency can result from: 1) Collateral depreciation, 2) Debt asset appreciation, or 3) Accrued Interest (Rate spikes eroding the Health Factor).
"What is the penalty structure?"
Liquidation Premium. Upon liquidation, the borrower forfeits a fixed percentage (e.g., 5%) of the liquidated collateral to the third-party liquidator.
"Are automated mitigations available?"
Partial Liquidation & Deleverage. The protocol supports partial liquidations to restore solvency without full closure. Automated deleveraging tools can be utilized to maintain the Health Factor.
Phase 4: Governance & Parameter Risk
User Intent: Assess the risk of adverse parameter changes by the market operator.
"Can parameters change mid-trade?"
Parameter Risk. Yes. Curators can modify Liquidation Thresholds (LTVs). However, these changes are subject to a mandatory Timelock, providing a window for borrowers to adjust or exit.
"What are the operational circuit breakers?"
Smart Oracles & Pauses. 1) Significant deviation between Main and Reserve price feeds will block operations. 2) Admins retain the ability to pause Credit Managers in emergency scenarios.
"Can access be revoked?"
Access Control. Curators can forbid specific tokens or adapters, preventing borrowers from increasing exposure to those assets.
Phase 5: Position Unwind & Liquidity Dependencies
User Intent: Evaluate the reliability of exit mechanisms under stress.
"What are the execution dependencies?"
External Liquidity. The "Atomic Close" relies on external DEX liquidity (e.g., Curve/Uniswap) to swap collateral for the debt asset. Thin liquidity or high slippage can cause repayment transactions to revert.
"What is the contingency procedure?"
Manual Unwind. If atomic execution fails, the borrower must manually withdraw collateral (subject to solvency checks), execute swaps externally, and repay the debt.
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