Core Mechanics
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The Vault abstraction is the primary borrower touch point in the protocol, which is a combination of a smart contract wallet and a credit line. Each borrower receives a Vault instance for every liquidity pool they wish to utilise.
When a drawdown is initiated by the Vault's authorised EOA (owner), funds are sent to the borrower's Vault and then spent to purchase NFTs on the supported marketplaces within a single atomic transaction.
The protocol restricts the permitted range of actions that a borrower can take with borrowed funds through one or more rules engines, which are implemented as smart contracts and deployed on-chain. In concrete terms, the primary usage scenarios as of now are:
Purchase of NFTs from authorised marketplaces;
Transfer of collateralised NFTs to authorised contracts.
At this time, all assets purchased must have a value within the permitted range defined by , the current floor price of the collection as supplied by the Oracle contract, which supplies a 14-day TWAP.
Voyage loans have a relatively low entry requirements. However, to avoid denial-of-service and other existential threats posed by bad actors, it is necessary to introduce a barrier to entry in order to protect reserve liquidity.
Hence, we propose that the borrower must pay down the first instalment as a guarantee so that they will not default on the loans. This first instalment will also act as a buffer for the exposure at default from the lender's point of view as it will be considered forfeited by the borrowers.
To avoid liquidation, borrowers must make payments at the predetermined intervals. Failure to do so will result in the forfeiting of previously paid instalments and liquidation of assets purchased with the loan until there is sufficient liquidity to make Senior tranche depositors whole. Liquidation criteria is described in greater detail in the .