Domain Lending Pool

💰 Domain Lending Flow

This diagram illustrates how the DomainLendingPool in Auctra enables liquidity providers (LPs) and borrowers to interact with tokenized domains as collateral. The process is divided into five phases:

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🏦 1. Liquidity Provision

• Liquidity Providers deposit USDC into the pool using depositLiquidity(amount)

• The pool calculates LP shares proportional to the deposit (amount / totalAssets)

• Shares are minted and assigned to the LP

• USDC funds are transferred into the pool and become available for borrowers

📌 This ensures the pool is funded and ready to issue loans.

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🖼️ 2. Collateral & Borrowing

• Borrower deposits a domain NFT as collateral via depositCollateral(nft, tokenId)

• The pool queries the Oracle to fetch domain details (premium status, valuation in USD, expiration)

• NFT is transferred from the borrower to the pool and stored as collateral

• Borrower requests a loan (borrow(amount))

• The pool checks:

  • Interest accrual on borrower

  • Maximum borrowable amount based on collateral value

  • Available pool liquidity

• If valid, USDC (minus origination fee) is transferred to the borrower

• Debt records are updated

📌 Domains now act as collateralized assets to unlock liquidity in USDC.

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💸 3. Interest & Repayment

• Interest accrues automatically whenever a borrow or repayment occurs

• Debt grows over time: principal + interest

• Borrower repays by calling repay(amount)

• The pool applies repayment to:

  • Interest portion (sent to Treasury as reserves)

  • Principal portion (reduces outstanding debt)

• Debt balances are updated accordingly

📌 This ensures lenders earn yield, while borrowers gradually repay principal + interest.

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⚠️ 4. Liquidation (if Health Factor < 1)

• The pool refreshes collateral value via Oracle price checks

• If the borrower’s Health Factor drops below 1 (e.g. collateral value < loan value), liquidation can occur

• After a grace period, the borrower can be liquidated:

  • Full debt amount is repaid from the collateral

  • The NFT collateral is transferred to the protocol/liquidator

  • Borrower’s positions are cleared

📌 This protects the pool and ensures solvency by preventing undercollateralized loans.

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🔓 5. LP Withdrawal

• Liquidity Providers can withdraw USDC by calling withdrawLiquidity(amount)

• The pool calculates how many shares need to be burned

• Pool checks cash availability to ensure sufficiency

• Shares are burned from the LP’s balance

• Equivalent USDC is transferred back to the LP

📌 This allows LPs to safely exit and reclaim their liquidity + earned yield.

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🔑 Key Takeaways

• Liquidity Providers earn yield by supplying USDC

• Borrowers unlock liquidity with their domain NFTs

• Oracle ensures fair valuation of collateral

• Treasury collects protocol fees and reserves

• The system maintains stability via health checks and liquidation mechanisms

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✨ In short: Auctra’s Domain Lending Pool transforms tokenized domains into fully functional collateral, creating liquidity, yield opportunities, and a secure on-chain credit market.