Off-chain loans
This structure is not implemented during the time when Sweep is focused on supporting tokenized securities
Last updated
This structure is not implemented during the time when Sweep is focused on supporting tokenized securities
Last updated
Stabilizers can make off-chain loans with collateral pledges.
Borrowers can apply to a protocol for funding after configuring a Stabilizer and a related off-chain deal. A related section on "Borrowing" describes this process.
Borrowers can borrow and repay at any time. They should be motivated to borrow when they think they can make a spread over the cost of funding
Disbursement will go to a specific wallet. The recipient wallet may have pre-programmed workflows.
Todo: Design a closing process that exchanges a disbursement and the collateral pledge. Extend this to an incremental close that can fund one borrower doing a series of deals.
Repayment terms will be customized. If the loan is repayable on demand, then the Stabilizer or the funding protocol can demand repayment. Sweep provides a "balancer" system that can make repayment requests and monitor for repayment within the agreed time window. Other borrowers will provide code for monitoring scheduled payments.
Some savings protocols may be able to handle long duration and low liquidity assets with repayment schedules that cannot be accelerated.
The borrower and the protocol should agree on a collateral agent. The collateral agent is a legal entity that represents the DeFi lenders.
Sweep provides a collateral agent that specializes in representing DeFi pools, and has tools to do on-chain reporting, signaling and funds delivery.
The collateral agent is responsible for monitoring conditions of default on-chain or off-chain, and signaling them.
Every loan should come pre-packaged for liquidation. If the loan is for a liquid asset, the collateral agent should get a loan agreement from the borrower that gives the collateral agent a right to sell the asset in conditions of default. If the loan is for a less liquid asset, the loan agreement should be transferrable. The protocol will auction off the Stabilizer and the loan to an expert liquidator or distressed investor.
