I. Abstract | II. Introduction | III. Tokenomics | IV. Disclaimer & Use Terms | V. Conclusion
This litepaper explains the motivations and concepts behind Yamfore. A decentralised non-custodial lending protocol powered by Cardano. This litepaper elaborates on all the technical details of the protocol.
Traditionally, crypto-backed loans offered by either centralised or decentralised platforms / protocols have typically been facilitated between two parties. The borrowers, who seek to keep exposure to their crypto assets, but require access to immediate capital. And the lenders, who supply capital to the borrowers in return for ongoing interest repayments on their lent funds. The issue with this arrangement stems from the significant power imbalance between both parties. The borrower is often presented with unfavourable loan to value ratios, the constant upkeep with interest repayments, and the possibility of a margin call at any time due to a sudden market downturn. If the borrower fails to meet any of these obligations, their collateral position is liquidated, and their loan position is closed. This model arguably presents substantial risks to any individual seeking a crypto-backed loan, and remains a far cry from a “set & forget” prospect.
Yamfore instead takes a different approach, and completely removes the lender from the equation. All crypto-backed loans facilitated through Yamfore are directly funded from the protocols internal stablecoin treasury. This removes many of the counterparty requirements of the lenders, such as ensuring the value of the borrower’s collateral never falls below a certain threshold or requiring ongoing interest repayments etc.
Because all capital lent is owned by the protocol itself, a greater level of risk is able to be taken on by the protocol on behalf of the borrowers. This enables significantly more favourable loan terms that otherwise wouldn’t be possible through traditional lending protocols / platforms. The Yamfore protocol simply relies on the continuous staking rewards earned from the borrowers deposited ADA collateral in the protocol as payment for their loan position with no further payment obligations required. There is a whitelist of approved Stake Pools the Yamfore protocol will strictly delegate to, the addition / removal of a Stake Pool from this whitelist is decided via on-chain governance. Ideally, all Stake Pools whitelisted via governance vote, should be well performing Stake Pools, minting consistent blocks, and within an ideal stake saturation level etc.
Yamfore will utilize a diverse basket of stablecoins upon launch. These stablecoins will be backed by verifiable on-chain assets, and native to the Cardano ecosystem, not bridged from other ecosystems. These are the initial criteria for stablecoins types launching in conjunction with Yamfore, but the list of accepted stablecoin solutions can be added to / removed via on-chain governance regardless.
Yamfore handles all stablecoins received in its treasury as transitory assets. This is due to the protocols main objective of keeping a high level of capital efficiency, thus immediately lending out any capital received to borrowers. Because of this, stablecoins are never “stored” in the protocols stablecoin treasury for any significant periods of time. The exact type of stablecoin given to a borrower as payment for their loan position will be determined by the protocol at the moment of a loan initiation, and mainly be subject to availability.
The Yamfore protocol also holds a liquidity treasury that contains 50% (500 million) of the total fixed supply of the native governance, and utility token of the protocol, $CBLP. The liquidity treasury enables individuals to provide liquidity to Yamfore via depositing their ADA into the protocols staking portal. This allows individuals to forfeit their usual ADA staking rewards, in return for an allocation of $CBLP tokens that are distributed, and redeemable, on a per epoch basis.
*Note: The exact mechanisms of the liquidity treasury will be further expanded upon in the tokenomics section
To acquire a loan, a user must first provide ADA as the collateral to borrow against. The users deposited ADA collateral will also require a corresponding amount of $CBLP tokens deposited alongside it. This ADA / CBLP lending ratio will be dictated via on-chain governance amongst CBLP token holders. The loan amount a user wishes to borrow is always proportional to the dollar value of their deposited ADA collateral, since the protocol only gives back a 1:1 dollar value exchange for any deposited ADA collateral. The $CBLP tokens deposited alongside the borrowers ADA collateral simply act as a security deposit for establishing a loan position, and are ALWAYS returned in their entirety to the borrower, on closure of their loan position. A non-fungible token representing ownership of the loan position will be minted and sent to the borrowers wallet on initiation of a loan position as well. These NFT deeds are required to redeem the deposited collateral in the protocol, and can also be utilized to perform multiple trading strategies.
The introductory ADA & CBLP lending ratio is 50% ADA / 50% CBLP
During times of high demand, $CBLP token holders can vote to increase the lending ratio. This ensures a higher allocation of $CBLP is required for a borrowers loan position, bringing added value to $CBLP token holders due to the surplus demand in the open-market. And during times of low demand, the rates can be adjusted accordingly to ensure the protocols treasury remains highly utilized, and capital efficient.
The Yamfore protocol primarily operates by collecting the earned staking rewards of the deposited ADA collateral of all borrowers in the protocol. The staking rewards earned from the deposited ADA collateral of all borrowers, is continuously collected as payment for their loan position, with no other / further payment obligations. The borrower is able to close their loan position at any time, pending the value of their deposited ADA collateral is equal to or above 110% of the borrowed principal amount. If a borrower desires to exit their loan position early, and redeem their deposited $CBLP tokens, but their deposited ADA collateral isn’t at or above the required level. The borrower can choose to pay the owed deficit of their ADA collateral to close their loan position immediately, and redeem their deposited $CBLP tokens. Alternatively, the borrower can also opt to pay back the owed principal amount with an accepted stablecoin, and completely bypass the 110% ADA collateral requirement. As stated before, the $CBLP tokens deposited alongside the borrowers ADA collateral simply act as a security deposit for establishing a loan position, and are ALWAYS returned in their entirety to the borrower on closure of their loan position.
*Note: Originally borrowed principal amount & 10% flat fee based off principal amount = 110%
Once a borrowers loan position is closed, 110% of the borrowed principal amount is subtracted from the borrowers deposited ADA collateral value. The borrower then receives the leftover difference of their ADA collateral, as well as the entirety of their deposited $CBLP collateral back. There are no further payment obligations for the borrower to fulfil. The 110% collateral requirement is NOT inclusive of any staking rewards earned by the borrowers deposited ADA collateral. This means the base value of the borrowers deposited ADA collateral itself, has to reach a value of 110% of the borrowed principal amount.
The ADA value collected by the protocol after the closure of a loan position is then exchanged to stablecoins, and sent back to resupply the stablecoin treasury. This is accomplished by enabling arbitrageurs to create transactions containing the required stablecoin amount to facilitate an exchange. The transactions formed by arbitrageurs will completely consume all ADA residing in the UTXO of a closed loan position, with the arbitrageurs receiving a 10% ~ payment, based from the principal amount exchanged.
In summary, a borrowers deposited ADA collateral ALWAYS needs to reach 110% the value of the borrowed principal amount, before their loan position can be closed, and their deposited $CBLP collateral / any surplus ADA is made redeemable to them. This can either occur through natural price appreciation or the borrower paying the owed deficit of their deposited ADA collateral to exit their loan position early. Alternatively, the borrower can also opt to pay back the owed principal amount with an accepted stablecoin, and completely bypass the 110% ADA collateral requirement. All crypto-backed loans initiated through Yamfore function more closely to a perpetual long position on the price appreciation of ADA than anything else. This varies greatly from more traditional crypto-backed loans from other protocols / platforms that maintain the expectations of the borrowers eventually “paying back” their borrowed capital.
Below is an example of a hypothetical lending scenario
Bob opens a $1,000USD crypto-backed loan position through Yamfore. The governance dictated lending ratio requires Bobs deposited collateral to have an ADA / CBLP ratio of (50% ADA / 50% CBLP)
*Note: This results in a loan to value ratio of 50% LVR
Bob now deposits his collateral in the protocol at the required 50% ADA / 50% CBLP ratio aka ($500usd ADA / $500usd CBLP) Bob receives a payment of $500USD worth of stablecoins and retains exposure to his $1,000USD worth of crypto assets, now in the form of ($500usd ADA / $500usd CBLP) Bob’s collateral is securely locked in the protocol with no fixed loan duration or liquidation risk.
After the commencement of his loan, Bob has had no further obligations to fulfil. Bob hasn’t been subjected to any margin calls, regardless of the price action of his collateral, nor has Bob been obligated to pay any ongoing fees. This has enabled Bob to operate with a strictly passive “hands off” approach, simply storing his loan NFT deed in a long term cold storage solution.
A year has passed, and Bobs deposited ADA and $CBLP collateral have now both doubled in value. The current market value of Bobs ADA collateral is $1,000USD, whilst Bobs $CBLP tokens are now valued at $1,000USD. Bobs ADA collateral has also been passively earning staking rewards for the protocol throughout his loan term. Bobs total collateral value now equals $2,000USD. Bob decides to close his loan position to access his appreciated assets. The protocol confirms Bobs ADA collateral has reached the required value of being equal to or above 110% of the borrowed principal amount. The protocol subtracts the owed amount of $550USD from the value of Bobs deposited ADA collateral.
*Note: 110% of borrowed principal = $550usd
The protocol then returns the difference of $450USD worth of ADA collateral back to Bob, as well as the entire $1,000USD worth of deposited $CBLP collateral. This means a total of $1,450USD ($450usd ADA + $1,000usd CBLP) worth of collateral is received by Bob.
*Note: The received $1,450usd worth of collateral isn’t inclusive of the initial $500usd stablecoin payment received by Bob on commencement of the loan position
The native governance and utility token underpinning the entire functionality of Yamfore, is the $CBLP token. The $CBLP token is required to utilise the services of the protocol, as well as provide a decentralised and fairly distributed method of enabling governance amongst individuals with the most monetary stake in the Yamfore protocol. The main utilities of the $CBLP token are as follows: Utility, Appreciation, and Governance.
The $CBLP token is the key requirement in utilising the lending services of Yamfore. This requirement ensures that there will always be a core demand / utility to the $CBLP token. This is a necessity to ensure that Yamfore has an integral asset growing alongside itself, as the protocol captures more market-share, liquidity, and demand.
There is a total fixed supply of 1 Billion $CBLP tokens. This ensures the native token governance and utility token underlying the protocol, remains deflationary in monetary nature. Yamfore is dedicated to a fair token distribution with a focus on community allocation. Therefore there will be no insider allocation given to venture capitalist, private investment firms or angel investors. The token distribution is community focused with 80%+ of the total circulating $CBLP tokens allocated for distribution amongst community members. This ensures a fair and transparent distribution of $CBLP tokens amongst individuals truly supportive of the protocols success, and not just heavily allocated to a select few affluent individuals.
Below is an illustration of the $CBLP token allocation.
*Note: Anyone can easily identify the official team wallet, which holds the majority of $CBLP tokens by simply searching for the “$yamfore” ADA handle. This was deliberately done to ensure full transparency of funds.
50% of $CBLP will be allocated for the liquidity treasury, which enables individuals to provide liquidity to Yamfore via depositing their ADA into the protocols staking portal in return for an allocation of $CBLP tokens that are distributed, and redeemable, on a per epoch basis.
25% of $CBLP will be allocated to the community, with all generated revenue going towards bootstrapping the stablecoin treasury. This distribution will take the form of the Fair Token Offering (FTO). The details of the FTO have yet to be released.
5% of $CBLP will be allocated for miscellaneous development costs. These included: $CBLP liquidity provision, auxiliary development costs, community building initiatives, partnerships, bug bounties etc
1% of $CBLP will be allocated for the community airdrop. This will be structured to reward all active community members of Yamfore, and bootstrap initial governance of the protocol amongst the most dedicated community members of Yamfore.
5% of $CBLP will be allocated for the NFBO event, with all generated revenue going towards protocol development.
19% of $CBLP will be allocated for the core development team, future hires, and team expansions etc
The $CBLP token is primarily tied to the success and longevity of the Yamfore protocol itself. As the Yamfore protocol captures more market share, users, liquidity, the price appreciation of $CBLP token will follow accordingly. The Yamfore protocol has two revenue sources facilitating its continuous growth. These two sources are in the form of the Profit Cycle, and the Liquidity Treasury.
The profit cycle is the revenue acquired from the continuously staking rewards of a borrowers loan position. This revenue enables the protocol to service more borrowers at a time, ultimately facilitating greater demand for the CBLP token. There will always exist a “base” ADA & CBLP lending ratio that the market will be willing to accept. When the ADA & CBLP lending ratio passes this point, no individual is willing to take on a loan position due to the unfavorable loan terms.
When the interest ( In the form of ADA staking rewards ) is collected by the protocol. That ADA revenue is then exchanged to stablecoins, via arbitration, and added back to the protocol treasury to facilitate further crypto-backed loans. The collected interest has now added more capital to the protocol, enabling more borrowers to be serviced. Specifically, the profits acquired from the interest repayments ( In the form of ADA staking rewards ) are now facilitating extra purchasing of $CBLP tokens due to the influx of new capital to the $CBLP markets from individuals seeking a loan from the protocol.
This “base” ADA & CBLP lending ratio will constantly be in flux, depending on general market sentiment, and a multitude of other economical factors. It is the responsibility of the CBLP token holders to ensure that this “base” lending ratio is always appropriately set for the current market conditions, via on-chain governance. An indicator of achieving this “base” ADA & CBLP lending ratio, is the stablecoin treasury of the protocol always remaining empty.
This creates a sustainable profit cycle consisting of :
Demand > Funding > Liquidity.
As the protocol is utilised by users seeking crypto-backed loans, the $CBLP token required to utilise the protocol sustains demand due to its utility.
The ADA collateral deposited by borrowers in the protocol ensures consistent staking rewards are being collected by the protocol. The staking rewards are then exchanged for stablecoins via arbitrage, and resupplied to the stablecoin treasury to lend out once more.
The influx of newly added funds in the stablecoin treasury, specifically the profits acquired in the form of staking rewards are now facilitating extra purchasing of $CBLP tokens. This is due to the protocol having additional capital to lend out. This consistent inflow of capital ensures the protocol is able to continually grow, and facilitate more crypto-backed loans over time.
The Yamfore liquidity treasury contains 50% (500 million) of the total fixed supply of the native governance and utility token of the protocol, $CBLP. The liquidity treasury enables individuals to provide liquidity to Yamfore via depositing their ADA into the protocols staking portal. This allows individuals to forfeit their usual ADA staking rewards, in return for an allocation of $CBLP tokens that are distributed, and redeemable, on a per epoch basis.
The liquidity treasury distributes a fixed amount of $CBLP tokens per epoch. These $CBLP tokens are shared amongst all delegators in the protocols staking portal, in proportionality to their delegation size. This means the payment amount a delegator receives is directly tied to the raw value size % of their delegation in the staking portal, when compared to all other delegators. For instance, if a delegator owns 1% of the total value of all delegated ADA residing in the staking pool, an equivalent 1% of the entire amount of $CBLP tokens set to be distributed for that epoch, will be fully rewarded to that delegator as payment. This system takes a fair supply & demand driven approach to token distribution, similar to that of the NFBO. Similar to ADA staking rewards, $CBLP rewards are distributed to delegators on a per epoch basis, and available to be withdrawn at any time. Any earned $CBLP rewards that haven’t been withdrawn yet, simply accumulate passively.
Any ADA sent to the protocol’s staking portal remains “liquid” / unlocked at all times, and is available to be immediately withdrawn by the delegator whenever they desire. There is a minimum wait time of x4 epochs, before a delegators deposited ADA begins to earn any $CBLP rewards. This is also the case for any further ADA deposited into a delegators position, and or if a delegator withdraws, and re-deposits the entirety of their ADA into the staking portal. The delegator is of course able to claim their accrued $CBLP rewards whenever they desire, without incurring this wait penalty, although there will be a minimum $CBLP withdraw requirement.
The Yamfore protocol exchanges all accumulated staking rewards to stablecoins, and sends those assets to resupply the stablecoin treasury, immediately. This occurs on a per epoch basis, as soon as any ADA staking rewards are received by the protocol. All UTXOs containing the ADA revenue from the staking portal will be made available for arbitrageurs to form transactions that consume all ADA residing in those UTXOs. Arbitrageurs will be given a 10% ~ payment for any exchanges conducted, which is derived from the base amount they’ve exchanged. The liquidity treasury also utilizes the same list of accepted / whitelisted Stake Pools the Yamfore protocol already strictly delegates to.
Similar to many other protocols, Yamfore utilizes a token weighted voting process. This fairly gives individuals with the most monetary stake in the protocol a larger say in the development of the protocol. This also creates a necessary threshold for crucial proposed changes to the protocol, requiring the true consensus of a large enough percentage% of $CBLP token holders to initiate / approve these proposals. There is a strict list of predefined lending parameters, able to be altered by $CBLP token holders.
These protocol lending parameters are only able to be altered via on-chain governance, inbuilt into the protocols smart contracts. This ensures governance of Yamfore, amongst $CBLP token holders, in a truly democratic & trustless fashion, without reliance on any external entity.
Below is an illustration highlighting the parameters able to be altered via on-chain governance by $CBLP token holders.
Below is an illustration of the step by step process of Yamfore governance:
Step 1 | Proposal Deposit:
The minimum threshold requirement of delegated votes by $CBLP token holders for a governance action to be initiated.
Step 2 | Voting Period:
The period of time $CBLP token holders are given to vote on an initiated proposal.
Step 3 | Quorum:
The required minimum percentage % of $CBLP tokens staked in the voting process to validate the results.
Step 4 | Consensus Threshold:
The required minimum percentage % of yes votes to approve the proposal.
Step 5 | Execution Delay:
The amount of time before the protocol implements the passed proposal.
Step 6 | Changes Complete:
The governance process is completed, and the proposed changes are implemented.
IV. Disclaimer & Use Terms
There exist some fundamental risks the end-user should be made aware of before interacting with the Yamfore protocol. The Yamfore protocol is an open-source collection of smart contracts operating independently on a blockchain. The distributed nature of the storage and operation of the protocol means no single individual, organisation, governing body, owns or controls the protocol. Instead, the holders of the $CBLP token dictate the development / direction of the protocol.
The Yamfore protocol is provided on a “USE AT OWN RISK” provision without any associated warranties or guarantees provided. No developer or entity involved in the creation or promotion of Yamfore is responsible for any damages / loss of funds resulting from the usage of the protocol. The Yamfore protocol will go through extensive internal testing, as well as external auditing before launching, however the risk of an undiscovered bug / exploit residing in the protocols smart contracts always remains a possibility. Depending on the severity of the bug / exploit, this could lead to partial, or complete loss of deposited funds.
As a condition of your use of the Yamfore website or any third party website connecting to it (collectively the “Site”), you agree that you: (i) are at least 18 years of age; (ii) are not barred from using the Protocol, the Site, or any connected services under any law applicable to you; (iii) will not interfere with the intended operation of the Protocol or Site, including by hacking, submitting a virus, fraudulent information or tokens, or attempting to overload, “flood,” or “crash” the Protocol or Site; and (iv) you are, and your use of the Protocol is and will be, in compliance at all times with all laws, rules, regulations or orders applicable to you.
THE PROTOCOL, THE SITE AND ALL INFORMATION CONTAINED ON THE SITE, ARE MADE ACCESSIBLE OR AVAILABLE ON AN “AS IS” AND “AS AVAILABLE” BASIS. YOU EXPRESSLY AGREE THAT USE OF THE SITE OR THE PROTOCOL IS AT YOUR SOLE RISK. TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, NONE OF YAMFORE, ITS SUBSIDIARIES, AFFILIATES, AND PARTNERS, OR ANY DEVELOPER, EMPLOYEE, AGENT OR LICENSOR ASSOCIATED WITH ANY OF THEM, WARRANT THAT USE OF THE SITE OR PROTOCOL WILL BE UNINTERRUPTED, FULLY SECURE, VIRUS- OR ERROR-FREE, NOR DO THEY MAKE ANY WARRANTY AS TO THE RESULTS THAT MAY BE OBTAINED FROM USE OF THE SITE OR THE PROTOCOL. EACH OF THE FOREGOING HEREBY DISCLAIMS ANY AND ALL REPRESENTATIONS, WARRANTIES AND CONDITIONS, WHETHER EXPRESS OR IMPLIED, AS TO THE PROTOCOL, THE SITE OR ANY INFORMATION CONTAINED ON THE SITE, INCLUDING, BUT NOT LIMITED TO, THOSE OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY, SUITABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AS WELL AS WARRANTIES IMPLIED FROM A COURSE OF PERFORMANCE OR COURSE OF DEALING.
IN NO EVENT SHALL YAMFORE, ITS SUBSIDIARIES, AFFILIATES, AND PARTNERS, OR ANY DEVELOPER, EMPLOYEE, AGENT OR LICENSOR ASSOCIATED WITH ANY OF THEM, BE LIABLE FOR ANY DAMAGES ARISING OUT OF OR RELATED TO: (I) YOUR USE OF OR INABILITY TO USE THE PROTOCOL, OR THE SITE, OR INFORMATION CONTAINED IN THE SITE, (II) YOUR INTERACTIONS WITH OTHER USERS, OR (III) THESE USE TERMS; INCLUDING BUT NOT LIMITED TO (A) DIRECT, INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES OF ANY KIND, AND (B) LOSS OF REVENUES, PROFITS, GOODWILL, CRYPTOCURRENCIES, TOKENS OR ANYTHING ELSE OF VALUE.
YOU AGREE THAT ANY CAUSE OF ACTION ARISING OUT OF OR RELATED TO THE SITE MUST COMMENCE WITHIN ONE (1) YEAR AFTER THE CAUSE OF ACTION ACCRUES, OR THE CAUSE OF ACTION IS PERMANENTLY BARRED.
Another risk pertains to the financial risk a user takes when initiating a loan through the protocol. This risk comes in the form of overexposure to the native utility & governance token of the protocol, $CBLP. The $CBLP token is inherently riskier than ADA due to its relatively limited use case and smaller market capitalization. Ideally any user taking out a crypto-backed loan against their ADA would prefer the majority if not all of their deposited collateral to remain denominated in ADA.
Although the borrowers $CBLP tokens are ALWAYS returned in full on closure of their loan position. The market value of a borrowers deposited $CBLP tokens may vary greatly from the start of their loan term to the end of it. The Yamfore protocol is only concerned with ensuring the value of the borrowers deposited ADA collateral is of sufficient value before allowing a borrower to close their loan position and redeem their $CBLP tokens. It is entirely possible for a borrower to close their loan position, and be in profit on their deposited ADA collateral, whilst down / neutral in price on their deposited $CBLP collateral. This is a very similar concept / effect as impermanent loss.
If a user deems the protocols ADA/CBLP collateral ratio requirement too high, and wishes to retain the majority / all of their deposited collateral in ADA. The user might instead choose to use a more traditional crypto-backed lending platform / protocol. The user of course forgoes all the advantages a community backed lending protocol offers, such as no margin calls, no ongoing interest repayments, indefinite loan terms etc.
On initiation of a loan through Yamfore, a Non-fungible token representing ownership of the loan position is minted and sent to the borrower’s wallet. This NFT deed is required to redeem the deposited collateral assets secured in the protocol. A borrower misplacing / losing their NFT deed, equates to them forfeiting their deposited collateral assets. The borrower should always ideally store their NFT deed in a secure long term cold storage solution such as a hardware wallet or air-gapped device.
The Yamfore protocol represents an alternative lending model for smart-contract protocols providing crypto-backed loans. Yamfore’s internal funding mechanism removes many of the counterparty requirements existing in other traditional lending protocols. These counterparty requirements include but aren’t limited to margin calls, ongoing interest payments, high loan to value rates etc. The combination of all these innovations enables Yamfore to become the first community backed lending protocol, offering truly “set & forget” crypto-backed loans for anyone and everyone.
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