š°Isolated Lending Pools
Last updated
Last updated
A single lending pool on Chedda holds an asset token supplied by liquidity providers, and a set of collateral tokens deposited by borrowers to take out loans. There are multiple isolated lending pools on Chedda.
The tokens in each pool are specified when the pool is created. Assets with similar risk profiles can be enabled as collateral in a given pool.
For example, a low risk vault might support highly liquid stablecoins such as USDT and USDC as collateral, while a medium risk DeFi token vault could support DeFi assets such as Curve's CRV, Compound's COMP token and UNI tokens as collateral.
Liquidity providers supply assets into token vaults to earn interest on their deposits. Borrowers deposit collateral and can take out open term loans which must be repaid with interest.
$CHEDDA token emissions are used to incentivize liquidity providers and borrowers. The protocol only rewards users who are invested long term with token emissions. Thus, only liquidity providers who have staked and locked $CHEDDA for a period of time to mint veCHEDDA are rewarded with $CHEDDA token rewards.
Token vaults can also be incentivized by adding ERC20 tokens to the vault incentives. Liquidity providers are then able to receive these incentives based on the proportion of liquidity they provide in the vault.
A borrowing position can be liquidated if it becomes under-collateralized at any point. Each borrowing position has a health factor which is the ratio of the collateral value to the value of the loan.
A position can be liquidated if the health factor drops below 1. A position could be partially or fully liquidated in order to restore the health factor above 1. When a position is liquidated, the liquidator buys the collateral for the insolvent loan at a discount, and provides the pending assets for that loan.
Chedda Isolated lending pools operating in a shared liquidity - isolated risk mode. This means that multiple collateral tokens can be grouped together to share liquidity of the pool asset, but borrowing positions can only be opened with a single collateral token.
Read more about how risk is managed in Risk Parameters.
