How Kadia Lending works

Not live yet

Kadia Lending v1 is in development, unaudited and not on mainnet, and not live yet on any network. This page describes the design that will launch. The hosted lending app has no markets connected. A test version of the earlier prototype’s ERG market runs on Ergo testnet (the testnet record); v1 replaces it there when v1 is deployed to testnet. Every figure marked as a launch parameter is illustrative until it’s set before deployment, and can change.

Source: kadia-lending at commit f9c0bdd (f9c0bdd766155fa8afa24e29e0e0cc13508e2d05), with corrections checked by kadia-lending against 66f4aca: docs/specs/economic-model-v1.md (EM v1), docs/specs/lending-v1-architecture.md (Arch), docs/specs/lending-design.md (LD), and the prototype’s docs/specs/economic-model.md (EM) for what v1 keeps.

One pool per asset you can borrow

Kadia Lending v1 has one pool per lent asset. You supply that asset to the pool, and borrowers take loans of it against collateral (EM v1 §1, Arch §2.1):

Pool (what you borrow)	Collateral it accepts
USE (DexyUSD)	ERG, SigUSD, rsBTC, rsETH, rsADA, rsDOGE, rsBNB
ERG	USE, SigUSD, rsBTC, rsETH, rsADA, rsDOGE, rsBNB
rsBTC, rsADA, rsETH, rsBNB, rsDOGE (one pool each)	USE, ERG, SigUSD
LP market (the prototype’s, kept as built)	Kadia DEX ERG/USE LP tokens

• Some pools start closed. The rsETH, rsBNB and rsDOGE pools are created at launch with a deposit cap and debt ceilings of 0. They open later by a timelocked release, once there’s liquidity for them (D52, EM v1 §6).
• rsFIRO comes later. Its pool joins by a release once its price source, cannonQ’s FIRO slot, is running (D52).
• SigUSD is collateral only. There’s no SigUSD pool (D50).
• Each loan holds one kind of collateral, against one pool (Arch §2.1).

Pools share risk inside, never across

• Pools are isolated from each other. ERG lenders are never exposed to the USE pool’s losses, and the LP market stays fully separate (Arch §2.2).
• Inside a pool, lenders share the risk of every collateral it accepts. If one collateral failed, that pool’s lenders could lose money, up to that collateral’s debt ceiling (EM v1 §5).
• The bridged coins share a group ceiling. The rs-coins all depend on Rosen and on a shared price source, so a pool caps their combined debt as well (D51, EM v1 §5.2).

Supplying

• You supply the pool’s asset and get pool shares. Shares are tokens worth a slice of the pool, and you can hold or transfer them (EM §8.1).
• Interest raises what each share is worth as it accrues, not when borrowers pay it (EM §4.1).
• Withdrawing pays your shares’ value in the pool’s asset, limited only by the cash the pool holds. When the pool is fully lent, the borrow rate climbs until repayments or new supply bring cash back (EM §8.2).
• A deposit cap limits how much a pool takes in while the code is young. It rises on a schedule fixed at launch, and only stops new supply: withdrawing, repaying and every borrower action ignore it. The amounts aren’t set yet (D48, EM v1 §6).
• A reserve takes losses first. It’s part of the pool set aside from interest. Losses beyond it lower every lender’s share value. There’s no insurance and no backstop (EM §7).

Borrowing

• You open a loan by locking collateral and borrowing the pool’s asset against it, up to that collateral’s maximum loan-to-value in that pool. Each collateral has its own limits (EM v1 §4.3). See Loan-to-value and liquidation.
• Both sides are priced in US dollars. Your collateral is valued in the borrowed asset by the ratio of their prices, so a loan’s health moves with both prices (EM v1 §3.4).
• The rate is variable, shared by every borrower in the pool, and moves with utilization: how much of the pool is lent out (EM §5). There’s no fixed rate and no maturity.
• Debt grows with the rate. Your loan records its share of the pool’s debt, so interest needs no action from you (EM §6).
• You can always repay, in full or in part, and so can anyone else on your behalf. At zero debt the loan closes, and all collateral goes back to you, never to whoever paid (EM §9.2).
• You can add collateral at any time, whatever the price feeds show. You can remove it only while the loan stays within its maximum loan-to-value (EM v1 §3.6, §8).
• Debt ceilings cap how much each collateral can borrow from a pool. A new loan that would pass the ceiling is refused; interest may carry the debt above it later (EM v1 §5.1).
• A loan’s owner is always a plain single-key wallet address (LD D43).

Governance

Lending v1 has a narrow pause and a timelocked upgrade (D46, Arch §3.5):

• Pause: a guardian group (2 of 5 keys) can pause new risk in a pool: new supply, new borrowing, and removing collateral from a loan that still has debt. It can also pause one collateral alone, which stops new borrowing against it and removing collateral from loans that use it, and leaves the rest of the pool open. A pause lasts up to 30 days, lapses on its own, and can be renewed.
• Upgrade: an upgrader group (3 of 5 keys) can announce a new version. It takes effect no sooner than 14 days later, and new risk in the pools it touches pauses for the whole notice.
• Wind-down: only the upgraders can close a pool to new risk, at once and for good: from then on, only exits work.
• Sunset: about two years after launch, no upgrade can take effect again. The upgrade path can also be given up earlier, for good.
• Most exits never pause. Lender withdrawals, repayments, adding collateral and liquidations never read the pause, so they work in every state. Removing collateral from a loan that still has debt is paused, like new borrowing (EM v1 §8).

Fees

• The protocol takes 10% of the interest borrowers pay; lenders get the rest (D28). Lenders pay nothing else.
• That 10% is split three ways (EM v1 §4.4, D55):
  • the reserve takes half, until it reaches its cap;
  • the Kadia oracle’s price committee gets a share of the protocol’s cut: 25% at launch, paid only from the treasury’s part, never the reserve’s. In the ERG pool it goes straight to the oracle’s deposit. In the USE and rs-coin pools it goes to the treasury in kind, and the treasury tops up the oracle in ERG by hand or through governance. Governance can set the share between 0% and 50%, with 14 days’ notice (EM v1 §4.4);
  • the treasury takes the rest.
• There’s no liquidation fee for the protocol. A liquidator’s whole bonus is the liquidator’s (D28).
• There’s no fee to supply, withdraw, borrow, repay, or add or remove collateral beyond the Ergo miner fee.

Prices

Each asset has one price source, fixed per network at launch: a Kadia oracle feed where one exists for it, and otherwise an older source. On testnet, tUSE is counted at $1. Mainnet lending launches only after USE is redeployed and the Kadia oracle has a USE feed, and it prices USE from that feed (EM v1 §3.5). See The oracle and stale prices.

Next: Loan-to-value and liquidation.