Peer-to-Pool Lending

Our Peer-to-Pool lending protocol leverages our BitWeave technology to allow a safe and cheap user experience for both borrowers and lenders where they agree on the paramaters of each loan.

On FluidTokens, anyone can be a borrower, a lender or both.

1. Liquidity Pools Creation

Lenders initiate the lending process by creating liquidity pools through on-chain transactions, establishing the foundation for borrowing activities. In this way lenders are the only ones in control of their liquidity and withdraw and update it any time.

Each liquidity pool supports a different type of collateral (Ordinals, Runes or BRC20) and has the lending parameters (max amount, APR, max duration, etc.) as decided by the creator of the pool.

All pools are then virtually aggregated based on the collateral.

2. Borrower's loan request

The borrower that needs liquidity simply selects the pool type that accepts the collateral he owns and then the amount of liqudity and the terms he's willing to accept for the loan.

FluidTokens automatically selects for him the best possible deal taking liquidity from multiple compatible pools at once.

At this point the borrower confirms the request signing a message for each pool involved (so he could have to sign multiple times). This operation is a simple signature and it's not a on-chain transaction.

3. Off-chain Communication

Lenders and borrower communicate securely through FluidTokens to prepare the loan activation transaction and the loan repayment transaction that the borrower will use when he will be ready to repay the debt and the interest.

This is a series of off-chain messages that are signed by both the lender and the borrower.

Please note that FluidTokens facilitates the off-chain communication but it is not able to modify in any way the signed messages that are exchanged by the two parties.

4. Loan Activation

When the borrower receives the last off-chain message (the signed repayment transaction) from the lender, he is ready to submit on-chain the loan activation transaction.

After Bitcoin blockchain confirms the transaction, the loan is considered Active.

5. Repayment

Before the loan deadline, the borrower must use the signed repayment transaction to repay the debt and the additional interest. If he refuses, he will never be able to get the locked collateral back.

6. Claim

If the borrower doesn't repay within the end of the loan period, the script protecting the collateral unlocks the possibility for the lender to withdraw the collateral.

Lender Risks and Mitigations

As in traditional finance, lenders look for earning opportunities accepting the risk that the loan could not be repaid in time ("default").

Therefore it's important to understand that the lender could lose the lent amount of BTC if the borrower doesn't pay back. If that happens, as compensation the lender is able to claim the locked collateral.

The BitWeave technology guarantees that the platform cannot interviene at all, therefore the respnosibilities are on the users.

Another important factor to consider is the expiration time of the proposed loan: if the locked collateral drop in value, lenders will have to wait the end of the loan to claim it and eventually sell it on a marketplace.

Finally, lenders shall know the instrinsic risks of DeFi.

Borrower risks and mitigations

Borrowers request BTC from lenders to use it in any way they prefer (investing, trading, staking, arbitrage and more) and promise to repay the debt with an additional interest. To give some guarantees to the lender, the borrower locks one or more Ordinals, BRC20 or Runes in the BitWeave loan script as collateral for the loan.

The borrower doesn't risk anything, except eventually losing the locked collateral if he doesn't repay the debt + interests before the expiration date.

Finally, borrowers shall know the instrinsic risks of DeFi.