A decentralized, non-custodial crypto asset lending platform offering both over-collateralized and under-collateralized loan, and an ERC-20 converter.
Aada is a decentralized money market protocol based on lending pools of crypto assets. In this market users can be depositors (lenders) or borrowers.
Lenders deposit their assets into smart contract controlled liquidity pools and accrue interest paid on loans drawn from the liquidity they provide to the pool.
An NFT-Bonds Strategy
NFTs represent an individual's deposit on the platform. Representing these deposits as NFTs means that they are tradable on the open market while the funds they represent are locked in the protocol accruing interest.
Lenders - When a lender deposits assets into the protocol a new NFT-bond representing their assets, and any interest it accrues from that point forward, is minted and sent to the lender. If the lender trades their NFT-bond to another user the new holder, upon trade-in, is entitled to the initial amount and the interest the bond has accrued since its creation.
Borrowers - A borrower is also a depositor because they must deposit assets to collateralize their loan. They receive an NFT-bond representing both their deposited collateral and their loan. Whoever holds this bond must provide the loan amount in order to claim the collateral also locked up with the NFT-bond.
Dynamic Interest Rates
Borrowers can borrow from any of the asset pools and the interest rate they pay is dynamic and calculate based on the utilization rate of the pool.
If a liquidity pool has a low utilization rate i.e. not many loans are being drawn from it; then the interest rate will be low to incentivize borrowing from that particular pool.
If a liquidity pool has a high demand i.e. many loans are being taken against the assets in that pool and the liquidity is almost fully allocated; then the interest rates will be higher. This will encourage both the repayment of loans and more deposits from lenders looking to capitalize on the greater gains to be had from lending at higher interest rates. As a result the interest rate of the pool will decrease.
The idea behind this dynamic interest rate, which begins to rise excessively as a pool approaches saturation, is to prevent pool saturation, i.e. when 100% of the pool is allocated to borrowers. When a pool is saturated liquidity providers can’t withdraw their deposited collateral.
Flash loans allow anyone to borrow any amount of an available assets without putting up collateral. This is under the condition, written into a smart contract, that the liquidity is returned within one block of the initial transaction. It is unclear how these loans are guaranteed to the platform without the depositing of collateral.
AADA token is the platform's token which lenders receive for depositing to liquidity pools and also accrue as interest on their deposits. These tokens can be staked to the platform for voting in governance votes, or stored in wallets to accomplish the same function. The whitepaper states that Aada wants to provide higher voting powers to those staking liquidity to DEXs but can’t assure this until a “stable DEX platform is built on Cardano”.
A dynamic quorum has been put in place for governance votes. This means that for a proposal to be accepted it must have a significantly higher majority of yes over no votes in order to pass.
A safety module is in place where users lock their AADA tokens to protect the protocol and receive daily fixed rewards. This is to reduce the impact of a shortfall event, i.e. unexpected loss of funds from:
- Smart contact risks
- Liquidation risks
- Oracle failure risks
Aada DeFi Academy
This DeFi academy has been built to help spread the word about DeFi and educate new and existing smart contract developers on Cardano.
Aada have partnered with Chainlink and will utilize their oracles for a Cardano price feed on the platform.
Aada has also built IOHK's ERC20 converter into the platform to help facilitate project migration to the Cardano blockchain.