Zero-Liquidation Loans: building DeFi's first loan option that spares borrowers from liquidations!
We're building "Zero-Liquidation Loans", DeFi's first loan option that spares borrowers from liquidations. Borrowers can borrow against their crypto-holdings but no longer face the pain of liquidation penalties and stressful LTV health monitoring. This is accomplished by giving borrowers the option to repay their loan either in the borrowed currency or the collateral currency, bearing similarities to so called dual currency deposits. Lenders, on the other hand side, are compensated with a higher return for bearing the collateral's downside risk. A nice side effect of Zero-Liquidation Loans is that they are less susceptible to flash crashes, liquidation cascades and oracle attacks than conventional lending and borrowing solutions.
How it's made
We developed the smart contracts in Solidity and the corresponding unit tests with truffle. We used infura to test against mainnet contracts (e.g., USDC). The front-end part has beend developed with react. The smart contracts have been deployed on Kovan and the front-end via netlify. For the demo liquidity pools we used Reflexer's vault to mint RAI stablecoins tokens and pointed to RAI as a borrow currency and WETH as a collateral currency. For the AMM design we used basic financial engineering primitives (put-call-partiy, black-scholes approximation) and combined them with the well-known constant-product formula to create a new concept for loans with embedded options. The whitepaper can be found on: myso.finance