A decentralized lending protocol of single currency pools with no borrowing duration and fluctuating interest rates based on loan length and pool utilization.
On the ADALend platform each lending pool holds a single currency. Depositors receive the platform's tokens, ADAL, for depositing their assets. Users can borrow assets from a liquidity pool if they deposit other assets that are accepted as collateral. The amount a borrower can borrow depends on the amount of collateral deposited.
Borrows have an infinite duration on their loan, with no repayment schedule. Partial or full repayments can be made at any time.
Interest rates for each pool of liquidity vary based on the utilization ratio of that pool. When the utilization rate is low so is the interest rate, conversely, when the utilization rate is high the interest rate is also high; rising also exponentially as a pool approaches full saturation. This entices borrower’s to repay their loans and lenders to add collateral to the pool to take advantage of higher returns.
Borrows can also access high value flash loans, without putting down collateral. This is based on the guarantee (although the method of how this is assured is not stated) that the full repayment, with interest, will be made “on a single transaction".
When an asset pool is idle partial amounts of that pool will be put into a “stable swap platform” where there’s no impermanent loss in the range. This is to reduce idle assets on the platform and, hopefully, to provide income to those who deposited the asset; although this is an unverified assumption, and the return for the depositor, if any, is not stated in the Litepaper.
There is an unspecified “origination” fee for borrowing, purportedly to prevent spam i.e. system abuse.
A DAO will control the following aspects of the protocol’s lending pools:
- Assets: adding and removing
- Collateralization ratio per asset
- Yield Programs
- Fee rates and usage of the fees
Voters in the DAO will also vote on protocol upgrades.
Voting power in the DAO is calculated by both native token balances and on-chain and off-chain activity analysis. Although it is not state how knowledge of this “activity” will be attained or how it is weighted when it comes to voting.