Minimum Viable Borrowing (MVB) on CKB

English CKB Development & Technical Discussion
2

Glad you appreciated, just it’s that our assumptions are so very similar:

  1. No margin calls
  2. No oracles
  3. Pre-agreed assetA/assetB ratio
  4. Pre-agreed contract duration
  5. P2P

The protocol you are proposing is strikingly similar to EthLend, so let’s digress a bit.

EthLend was a P2P lending protocol and indeed followed the these assumptions, so it had no margin calls.

Personally I never used it, but in simple terms worked roughly like this:

  1. Let’s assume you had 1M CKB,
  2. You could lock 1M CKB and ask to borrow 0.08 BTC from a lender for say 48 hours.
  3. You posted the borrowing request.
  4. Lenders would look at your past borrowings & repayments history
  5. A Lender would choose to lend you those 0.08 BTC (or not)
  6. Also, if you didn’t misbehave, you gained some native tokens

EthLend was working until it was not working anymore: borrowers could choose to opportunistically default on a borrowing, if the asset borrowed was more valuable than the collateral at the end of the loan.

Fast forward Aave, EthLend successor, introduced margin calls and oracles to make sure that borrowers would not default catastrophically on loans. Also Aave now is not P2P anymore, but centralized and overly complex at that.

This is the critical point: how can we incentivize the borrower enough so that he’ll pay-back the loan? (It’s an open problem and there is no easy solution)

Say we still want to maintain those 5 assumptions to create a DeFi primitive, then I only ever saw one way out: this is not Borrowing, but a different contract (for example a “:rightwards_hand::leftwards_hand::handshake:” contract) and must be priced accordingly to the risk the Lender Liquidity Supplier takes. This sets right the expectations of both parties.

Basically the solution is to remove the implicit assumption that this is some kind of borrowing, it is not. It’s something else and there still is a place for these contracts in the DeFi world.

@matt_ckb let’s assume that we implement your protocol, I lock 1M CKB and borrow switch 0.08 BTC from you for say 48 hours.

In which way would I bring you harm if I changed my mind 10 times about keeping those 1M CKB vs those 0.08 BTC?

Nothing, after 48 hours you will just get anyway what remains in the contract, right?

In which way would I bring you harm if I changed my mind 10 times about keeping those 1M CKB vs those 0.08 BTC while also switching back and forth the assets that are locked inside the contract?

Nothing, after 48 hours you will just get anyway what remains in the contract, right? Actually by giving me this possibility you could price the contract higher, so you would gain a bit more.

This is exactly a “:rightwards_hand::leftwards_hand::handshake:” contract.

Love and Peace, Phroi

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