Overview
MORE Markets enables lending and borrowing (ERC-20 and ERC-4626 Tokens) through a trustless, immutable smart contract deployed on the Ethereum Virtual Machine (EVM). The current implementation of the protocol is deployed on Flow Crescendo.
A decentralized lending and borrowing protocol, whether overcollateralized or undercollateralized, operates autonomously to facilitate asset exchanges. In overcollateralized markets, users borrow by depositing collateral exceeding the value of their borrowed assets, ensuring lender security. Conversely, in undercollateralized markets, users can borrow with collateral worth less than the borrowed assets, relying more on externalized trust such as asset recovery and insurance, while lenders earn relatively higher interest on the assets they supply.
MORE Markets facilitates 3 types of loans:
Overcollateralized loans are loans subject to the prevailing, standard loan-to-value threshold.
Premium overcollateralized loans are loans that remain overcollateralized, but benefit from higher-than-standard liquidation loan-to-value (LLTV) ratios.
Undercollateralized loans are loans that may be liquidated at LLTVs higher than 100%, such that loan values are intentionally permitted to surpass the collateral value.
Risk associated with externalized trust is mitigated through a combination of whitelisted credit attestation services that provide additional services such as real-time ratings and KYC, debt accounting, insurance and asset recovery.
Key Concepts
Collateral refers to the assets deposited by a user to secure a loan. This provides a safety net for the lender, ensuring that the loan can be recovered even if the borrower fails to repay.
Borrowing involves initiating a loan from a market on the protocol. Users must select the asset to borrow, the amount to borrow and the collateral they deposit. This enables users to leverage their existing assets without selling them.
Borrower Interest (Borrow APY) the annual percentage interest that borrowers must pay on the crypto they borrow. It represents the cost of borrowing and is expressed as a yearly rate based on the loan amount, but accrues in real-time at each epoch.
Credit is the trust extended to borrowers that allows them to receive funds based on non-collateral factors, specifically in the case of undercollateralized loans.
Liquidation Loan-to-Value (LLTV) is the ratio that determines the point at which a borrower’s collateral is insufficient to cover the loan, triggering a liquidation. It is a safety mechanism that protects lenders by ensuring loans are fully covered for overcollateralized loans and partially covered for undercollateralized loans even if collateral asset values drop.
Lending allows users to provide their assets to others in exchange for interest payments. It is a way to earn passive income from assets without actively trading them.
Yield (Earn APY) is the annual percentage yield earned by lenders on their lent out assets. It quantifies the returns made from lending activities, expressed as a percentage per year and accrues in real-time at each epoch.
Repayment is the process of returning borrowed assets along with any accrued interest. It fulfills the borrower's obligation and allows the collateral to be unlocked and returned to the borrower.
Liquidations occur when the value of the collateral falls below a specified threshold (LLTV), leading to its automatic sale to repay the outstanding loan. This protects lenders from losses due to market volatility.
Withdrawal refers to the act of removing assets from the protocol. It enables users to regain access to their funds including a borrower's collateral after a loan is repaid or a lender's lent assets.
Permissionless market creation
MORE Markets follows the Morpho approach to permissionless market creation. The protocol enables users to establish isolated markets that feature a single loan asset, a single collateral asset, a specified Liquidation Loan-To-Value (LLTV), an oracle, an interest rate model (IRM) and a switch for activating premium loans on the market.
In markets where undercollateralized loans are enabled, users also have access to additional parameters such as a credit attestation service, a maximum LLTV, an interest rate at maximum LLTV, and credit score ranges used to determine borrower LLTVs.
Through this approach, MORE, like Morpho deviates from the historical lending protocols that require governance in order to approve asset listing or modify settings and avoids wider protocol risk by avoiding aggregating multiple assets in a single lending pool.
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