Auxo Lend is a Cryptonative Credit market which offers the most capital-efficient borrowing solution for Auxo DAO through fixed-income lending. Auxo Lend is built on a newly conceptualised protocol and it's oracle-less. In the current DeFi landscape, most lending protocols are designed as general-purpose and implements safety via over-collateralization at the cost of negative capital efficiency. ``` Security Guarantee → Economic Capital Efficiency → Negative Uses of credit → General ``` Auxo Lend innovates by leveraging the Account Abstraction revolution to deliver a specific-purpose system where lent funds can only be used in a closed system, rather than enforcing overcollateralization in an open system. Because of that, loans are capital efficient and can target a collateralization factor slightly about 100%. ``` Security Guarantee → Algorithmic Capital Efficiency → Positive Uses of credit → Specific ``` # Overview ## Technical overview Auxo Lend is composed of 2 main components, the lending pools and the liquidation engine. ### Lending pools Lending pools are the core contracts that lenders directly use to lend money and earn interest. At the time of writing, 3 types of pools exist: - Fixed-rate pools, lenders earn a fixes rate on their principal (known in advance). - Variable rates, lenders earn a variable rate based on the performance of the pool. - Upfront-rate, lenders earn a fixed rate and interest is available instantly upfront without wait. Lending Pools are epoch based and follow a precise cycle of 4 different states. - PENDING: the epoch has not yet begun but is open for deposits and withdrawal of principal - ACTIVE: the epoch is farming and no longer accepting deposits. Withdrawal preference can still be changed - LOCKED: epoch no longer allows for changing withdrawal preferences - CLOSED: the epoch is closed and pending withdrawals can be made Lenders interacting with the pool can express their intent about what will happen with their principal and yield for the next epoch, Lenders can choose to: - Only withdraw the interest during the next epoch while leaving their principal invested - Auto-compound their interest to increase the principal they invested - Exit the pool and withdraw both principal and yield The intent system allows Lenders to automatically roll-over their position into new epoch, providing end-user with a similar experience of a perpetual lending pool. ### Seizable Module & Liquidation system The Seizable Module & Liquidation System is the piece of architecture which ensures that, shall an epoch payment default (not necessarily because of collusion but operators could loose access to the keys), the principal will be promptly seized and recovered by external third parties in a trustless manner. When a Lending Pool is created a new owner-less Safe is deployed, Operators are added via the Zodiac Role Module so they can perform certain qualifying actions. If a epoch expires without repayment, then liquidation process starts. 1. The Safe is seized, Roles are removed from the Operators. 2. A Dutch Auction starts to liquidate the Safe. 3. When a liquidation occurs: - the pool is repaid - the ownership is given to the liquidator - all modules are removed from the Safe, including this same one The Auction starts with an initial price of: `principal_amount * 2` and slowly decreases over time `t` until `principal_amount`. Furthermore, other types of liquidation system are envisioned to be implemented over time. # Roadmap Auxo Lend Roadmap is designed incrementally with the goal to validate single chunks of the architecture in isolation. Greater level of details is given to the first milestone. All milestones below are subject to change. **#1 Pilots** The pilots will be open only to whitelisted Lenders with limited max amount available for deposit (capped). The pilots will be run with unaudited contract and without liquidation system, with each pilot expected to run for no longer than 2-3 months. Multiple pilots could well run in parallel. Goal for Pilots: - Investigate early adopters preferences towards Fixed vs Variable rate pools - Investigate operator workflow and potential optimisations. - Measure interest of Lenders towards the pools at different rates. Features for Pilots: - Dapp for lenders - Variable rate lending pool (USDC) - Fixed rate lending pool (USDC) **#2 Alpha** The alpha version is expected to raise deposits limits, include enhancements and introduce a liquidation system with whitelisted liquidators. **#3 Beta** The beta version is expected include a fully trustless liquidation system with capped deposits. **#4 Version 1** Uncapped deposits and fully trustless liquidations. # Current state - Everything needed for the pilot is currently being tested internally. - Two PoCs have been developed for the Seizable Module & Liquidation system. - Other liquidation mechanics have been investigated.