Borrowing & Lending
To acquire a loan, a user must first provide ADA as the collateral to borrow against. The users deposited ADA collateral will also require a corresponding amount of $CBLP tokens deposited alongside it. The loan amount a user wishes to borrow is always proportional to the value of their deposited ADA collateral, since the protocol only gives back a 1:1 value exchange for any deposited ADA collateral. The $CBLP tokens deposited alongside the borrowers ADA collateral simply act as a security deposit for establishing a loan position, and are ALWAYS returned in their entirety to the borrower on closure of their loan position. During a loan term the borrower is never subjected to any margin calls, ongoing interest repayments and maintains an indefinite repayment schedule.
A non-fungible token representing ownership of the loan position will be minted and sent to the borrowers wallet on initiation of a loan. These NFT deeds are required to redeem the borrowers deposited collateral in the protocol, and can also be utilized to perform multiple trading strategies.
The ADA / CBLP lending ratio is simply dictated via on-chain governance amongst $CBLP token holders. During times of high demand, $CBLP token holders can vote to increase the lending ratio. This ensures a higher allocation of $CBLP is required for a borrowers loan position, bringing added value to $CBLP token holders due to the surplus demand in the open-market. And during times of low demand, the rates can be adjusted accordingly to ensure the protocols treasury remains highly utilized, and capital efficient.
Current ADA & CBLP lending ratio
Yamfore will utilize a diverse basket of stablecoins upon launch. These stablecoins will be backed by verifiable on-chain assets, and native to the Cardano ecosystem, not bridged from other ecosystems. These are the initial criteria for stablecoins types launching in conjunction with Yamfore, but the list of accepted stablecoin solutions can be added to / removed via on-chain governance regardless. Yamfore treats all stablecoins received in its treasury as “transitory assets”. This is due to Yamfores main objective of keeping a high level of capital efficiency, thus immediately lending out any & all capital received to borrowers. Because of this, stablecoins are never “stored” in the stablecoin treasury for any significant periods of time. The exact type of stablecoin given to a borrower as payment for their loan position will be randomly determined by the protocol at the moment of loan initiation, and mainly be subject to availability.
An individual is able to borrow as much as they desire, pending they have the sufficient collateral amount to borrow against. There are only limitations on the individual loan sizes able to be borrowed at a time, but there are no restrictions on the amount of individual loans a borrower is able to acquire.
There is no method of directly providing lending capital to Yamfore. All crypto-backed loans facilitated through Yamfore are directly funded from the protocols internal stablecoin treasury. This was necessary to remove many of the counterparty requirements of the lenders, such as ensuring the value of the borrower’s collateral never falls below a certain threshold or requiring ongoing interest repayments etc.
The borrower isn’t required to "repay" their loan at all, at least not in the traditional sense. The Yamfore protocol simply operates by collecting the earned staking rewards of all deposited ADA collateral in the protocol. All staking rewards earned from the deposited ADA collateral of borrowers during their loan term are collected as payment by the protocol with no other / further payment obligations required from borrowers. The borrower is able to close their loan position at any time, pending that the value of their deposited ADA collateral is equal to or above 110% of the borrowed principal amount. This can either occur through natural price appreciation or the borrower paying the owed "deficit" of their deposited ADA collateral to make up the difference, and exit their loan position immediately. The 110% collateral requirement is NOT inclusive of any staking rewards earned by the borrowers deposited ADA collateral. This means the base value of the borrowers deposited ADA collateral itself, has to reach a value of 110% of the borrowed principal amount.
Simply put, nothing. Because all capital lent by the protocol is owned by the protocol itself, a greater level of risk and more favourable loan terms is able to be given to the borrowers. This results in more competitive loan terms than traditional lending protocols / platforms and enables borrowers to have the assurance that their loan positions are secured regardless of any volatility in the financial markets. The Yamfore protocol simply relies on the accumulated staking rewards earned from the borrowers deposited ADA collateral in the protocol as payment for their loan position with no other / further payment obligations needed.
The borrower is able to close their loan position at any time, pending that the value of their deposited ADA collateral is equal to or above 110% of the borrowed principal amount. If the borrower desires to exit their loan position early and redeem their deposited $CBLP tokens, but their deposited ADA collateral isn’t at or above the required level. The borrower can choose to pay the owed deficit of their ADA collateral to close their loan position, and immediately redeem their deposited $CBLP tokens. As stated already, the $CBLP tokens deposited alongside the borrowers ADA collateral simply act as a security deposit for establishing a loan position, and are ALWAYS returned in their entirety to the borrower on closure of their loan position.
When a borrowers loan position is closed, 110% of the borrowed principal amount, as well as all earned staking rewards during their loan term is subtracted from the borrowers deposited ADA collateral value. The borrower receives the leftover difference of their ADA collateral, as well as the entirety of their deposited $CBLP collateral. The 110% collateral requirement is NOT inclusive of any staking rewards earned by the borrowers deposited ADA collateral. This means the base value of the borrowers deposited ADA collateral itself, has to reach a value of 110% of the borrowed principal amount. (Note: 110% = originally borrowed principal amount & 10% flat fee based off principal amount)
The Yamfore liquidity treasury contains 50% (500 million) of the total fixed supply of the native governance, and utility token of the protocol, $CBLP. The liquidity treasury enables individuals to provide liquidity to Yamfore via depositing their ADA into the protocols staking portal. This allows individuals to forfeit their usual ADA staking rewards, in return for an allocation of $CBLP tokens that are distributed, and redeemable, on a per epoch basis.
The liquidity treasury distributes a fixed amount of $CBLP tokens per epoch. These $CBLP tokens are then shared amongst all delegators in the protocols staking portal, in proportionality to their delegation size. This means the payout amount a delegator receives is directly tied to the raw value size % of their delegation in the staking portal, when compared to all other delegators. As an example, if a delegator owns 1% of the total value of all delegated ADA residing in the staking pool, an equivalent 1% of the entire amount of $CBLP tokens set to be distributed for that epoch, will be fully rewarded to that delegator as payment. This system takes a fair supply & demand driven approach to token distribution, similar to that of the NFBO. Similar to ADA staking rewards, $CBLP rewards are distributed to delegators on a per epoch basis, and available to be withdrawn at any time upon obtainment. Any earned $CBLP tokens that haven't been withdrawn yet, simply accumulate passively in value. Any ADA sent to the protocol’s staking portal remains "liquid" / unlocked at all times, and is available to be immediately withdrawn by the delegator whenever they desire. There is a minimum wait time of x4 epochs, before a delegators deposited ADA begins to earn any $CBLP rewards. This is also the case for any further ADA deposited into a delegators position, and or if a delegator withdraws, and re-deposits their ADA into the staking portal. The delegator is of course able to claim their $CBLP rewards whenever they desire, without incurring this wait period. A non-fungible token representing ownership of the delegators position in the staking portal will be minted, and sent to the delegators wallet on initiation of a stake position. This NFT will act as the delegators receipt, and is required to redeem any deposited ADA in the staking portal, or claim any $CBLP rewards. The Yamfore protocol immediately exchanges all accumulated ADA staking rewards to stablecoins, to resupply the protocols stablecoin treasury. This occurs on a per epoch basis, as soon as any ADA staking rewards are received by the protocol. All UTXOs containing the ADA revenue from the staking portal will be made available for arbitrageurs to form transactions that consume the ADA residing in those UTXOs. Arbitrageurs will be given a 10% ~ payment for any exchanges conducted, which is derived from the base amount they’ve exchanged.
The main risk comes in the form of overexposure to the native utility & governance token of the protocol, $CBLP. The $CBLP token is inherently riskier than ADA due to its relatively limited use case, and smaller market capitalization. Ideally any user taking out a crypto-backed loan against their ADA would prefer the majority if not all of their deposited collateral to remain denominated in ADA.
Although the borrowers $CBLP tokens are ALWAYS returned in full on closure of their loan position. The market value of a borrowers deposited $CBLP tokens may vary greatly from the start of their loan term to the end of it. The Yamfore protocol is only concerned with ensuring the value of the borrowers deposited ADA collateral is of sufficient value before allowing a borrower to close their loan position and redeem their $CBLP tokens. It is entirely possible for a borrower to close their loan position and be in profit on their deposited ADA collateral, whilst down / neutral in price on their deposited $CBLP collateral.