Contents
I. Abstract | II. Introduction | III. Tokenomics | IV. Disclaimer & Use Terms | V. Conclusion
I. Abstract
This litepaper explains the motivations and concepts behind Yamfore, a decentralized non-custodial lending protocol powered by the Cardano blockchain. It elaborates on all the technical details of the protocol and provides the reasoning behind the various design choices.
II. Introduction
Traditionally, crypto-backed loans have been facilitated between two parties: borrowers, who seek to keep exposure to their crypto assets but require access to working capital, and lenders, who supply capital to the borrowers in return for ongoing interest repayments on their lent funds. This arrangement has a significant power imbalance, as borrowers are often presented with unfavorable loan-to-value ratios, the constant upkeep of interest repayments, and the possibility of a margin call at any time due to a sudden market downturn. If a borrower fails to meet any one 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-and-forget” prospect.
Yamfore takes a different approach by completely removing the lender from the equation. All crypto-backed loans facilitated through Yamfore are directly funded from the protocol’s 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. Because all capital lent is owned by the protocol, a greater level of risk can be taken on by the protocol on behalf of the borrowers. This enables significantly more favorable loan terms that otherwise wouldn’t be possible through traditional lending protocols or platforms.
Upon launch, Yamfore will utilize a diverse basket of stablecoins. These stablecoins will be backed by verifiable on-chain assets, and be native to the Cardano blockchain, not bridged from other ecosystems. These are the initial criteria for stablecoin solutions launching in conjunction with Yamfore, but the list of accepted stablecoin solutions can be added to or removed via on-chain governance.
Yamfore handles all stablecoins received in its treasury as transitory assets. This is due to the protocol’s 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 protocol’s 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 will mainly be subject to availability.
The Yamfore protocol has an internal treasury that contains 5% (50 million) of the total fixed supply of the native governance and utility token of the protocol, CBLP. This treasury is referred to as the CBLP treasury, and enables individuals to indirectly provide liquidity to Yamfore via depositing their stablecoins into the protocol’s CBLP auction portal. In return, individuals will acquire an allocation of CBLP tokens, which is determined through fair market supply and demand mechanisms. The CBLP auction portal event is continuously occurring with rewards being calculated and claimable on a per epoch basis.
*Note: The exact mechanisms of the CBLP treasury will be further expanded upon in the tokenomics section
To acquire a loan, users must first provide ADA as collateral. They will be charged a one-time, fixed percentage fee based on the total USD value of their deposited ADA collateral, which is only payable in CBLP tokens. This fee, known as the CBLP flat fee, is a lending parameter of the protocol that is determined through governance amongst CBLP token holders. At the time of the protocol’s mainnet launch, the CBLP flat fee will be set at 25%. The CBLP tokens received as payment for initiating a loan position are then sent to the CBLP treasury, effectively “burning” them from circulation.
During times of high demand, CBLP token holders can vote to increase the CBLP flat fee. This ensures that a higher allocation of CBLP tokens is required for a borrower’s loan position, which brings added value to CBLP token holders due to the surplus demand in the open market for CBLP. During times of low demand, the fee can be adjusted accordingly to ensure that the protocol’s treasury remains highly utilized and capital efficient.
The user initiating a loan position will also receive a non-fungible token (NFT) representing ownership of the loan position. The NFT will be minted and sent to their wallet. These NFT deeds are required to redeem the deposited collateral in the protocol, and can also be used to perform multiple trading strategies.
The introductory CBLP Flat Fee is 25%
When a user initiates a loan position, they must abide by a set loan-to-value ratio and a fixed yearly interest rate, which are both lending parameters governed by CBLP token holders. The yearly fixed interest rate is calculated against the borrower’s principal amount, with any accrued interest added to the total debt of the loan position on a per-epoch basis. The borrower does not need to make any ongoing interest repayments during their loan term; the interest simply accumulates to the total owed debt position of the borrower. The fixed annual interest rate will be set at 7% when the protocol launches on mainnet.
Example: A borrower with a $100,000 loan at a 7% fixed interest rate will incur $7,000 in yearly interest. This interest rate accumulates on a per-epoch basis at a rate of $95.89 per epoch, which is calculated as $7,000 / 73 epochs.
The Yamfore protocol applies its staking credentials to the borrower’s deposited ADA collateral. This means that the protocol maintains custody of the collateral, and receives any accrued ADA staking rewards during the loan term. The borrower forfeits all of their ADA staking rewards to the protocol as further payment for their loan position.
The collected ADA staking rewards are sent to the ADA exchange pool, where arbitrageurs can obtain a fixed market percentage discount on the price of ADA in exchange for providing stablecoins to the protocol. The stablecoins received from the exchange pool are immediately lent out, which incentivizes more demand for CBLP tokens in the open market.
The list of stake pools that the protocol delegates to is a lending parameter that is determined through governance by CBLP token holders. The protocol’s main function is to periodically rebalance its delegation among the elected stake pools to minimize the risk of over-exposure to a single poorly performing or malicious stake pool. Any poorly performing stake pool can of course be also removed entirely from the protocol via a governance vote.
In summary, Yamfore operates by collecting a range of fees from all loans generated on the platform. These fees include a CBLP flat fee, accrued interest repayments, and ADA staking rewards. When a borrower closes their loan position, they must pay back the principal amount and any accrued interest. The borrower then receives their deposited ADA collateral back. The collected principal and interest amount are then sent back to the stablecoin treasury to facilitate further borrowing. During the loan term, the protocol remains the recipient of all ADA staking rewards generated by the borrowers deposited ADA collateral.
Borrowers are not subject to margin calls or liquidation risk during their loan term, regardless of the price action of their collateral. They also do not have to make any ongoing interest repayments, and their loan term is indefinite. This makes Yamfore crypto-backed loans more similar to perpetual long positions on the price appreciation of ADA than traditional crypto-backed loans from other protocols or platforms.
Below is an example of a hypothetical lending scenario
Bob has $1,000 worth of ADA and wants to open a crypto-backed loan through Yamfore. The protocol’s lending terms require a 25% CBLP flat fee, a fixed yearly interest of 7%, and a 50% loan-to-value ratio.
Bob has two options to meet the 25% CBLP flat fee requirement. He can either:
Supplement his existing ADA collateral: Bob can purchase $250 worth of CBLP tokens on the open market, bringing his total collateral to $1,250. This would satisfy the 25% requirement, and the $250 worth of CBLP tokens would be used to cover the one-time payment of his loan position. Bob would then have $1,000 worth of ADA collateral that he can borrow against. At a 50% loan-to-value ratio, Bob would receive $500 in funding from the protocol for his loan position.
Or
Reallocate a portion of his ADA collateral: Bob can also choose to reallocate a portion of his existing $1,000 worth of ADA collateral to meet the required 25%. To do this, he would simply re-portion his ADA collateral by 125%, exchanging 25% of his ADA for $CBLP. In the case of Bob’s $1,000 worth of ADA, this would mean exchanging $200 worth of his ADA collateral to CBLP tokens as payment for the loan position. This leaves Bob with $800 worth of ADA collateral to borrow against. At a 50% loan-to-value ratio, Bob would receive $400 in funding from the protocol for his loan position.
To simplify the explanation, Bob chose to supplement his existing $1,000 worth of ADA collateral with $250 worth of CBLP tokens in order to pay for his loan position. He then deposited the ADA collateral in the protocol and received a stablecoin payment of $500. With no fixed loan duration, liquidation risk, or ongoing repayment required, Bob now retains exposure to his $1,000 worth of ADA collateral in the protocol. He has no further obligations to fulfill and can remain on a strictly “hands-off” approach.
A year later, Bob’s ADA collateral had doubled in value to $2,000. He decided to close his loan position by repaying the principal of $500 and the accrued 7% fixed yearly interest of $35, totaling $535. He received back the entirety of his deposited assets, and the collected principal and interest amount was then sent back to the stablecoin treasury to facilitate further borrowing. Additionally, during Bob’s loan position, the protocol had been the sole recipient of all ADA staking rewards generated by his deposited ADA collateral.
To summarize, Bob paid a total of $285 in fees during his entire loan term, including a CBLP flat fee of $250 and interest accrued of $35. When taking into account the appreciation of his ADA collateral, Bob remained at a value surplus of $1,715.
III. Tokenomics
The CBLP token is the native governance and utility token of Yamfore. It is required to use the protocol’s services, and it provides a decentralized and transparent method for individuals with the most monetary stake in the protocol to participate in governance. The CBLP token has three main attributes: Utility, Growth, and Governance.
Utility
The CBLP token is the native governance and utility token of Yamfore, and is a key requirement for using its lending services. The token underpins the entire functionality of the protocol’s lending mechanism, and there is a total fixed supply of 1 billion CBLP tokens. Yamfore is committed to a community-focused token distribution, with 75%+ of the tokens allocated to community members. This ensures that the CBLP token is distributed to those who are most supportive of the protocol’s success, not just to a select few affluent individuals.
Below is an illustration of the $CBLP token allocation.
Cardanoscan: https://cardanoscan.io/token/ee0633e757fdd1423220f43688c74678abde1cead7ce265ba8a24fcd43424c50?tab=transactions
Policy ID:
ee0633e757fdd1423220f43688c74678abde1cead7ce265ba8a24fcd
Fingerprint:
asset1vha2kdkxfegsam7qxr5hw8h7yglg9aljcphxph
*Note: The official team wallets can be easily identified by searching for their respective ADA handles. This was done deliberately to ensure full transparency of funds.
$CBLP Treasury ( $yam_treasury )
5% of CBLP will be allocated for the CBLP treasury, which enables individuals to indirectly provide liquidity to Yamfore via the CBLP auction portal.
Community ( $yam_community )
50% of CBLP will be allocated to the community, with all generated revenue going towards bootstrapping the stablecoin treasury via the Fair Token Offering (FTO)
Miscellaneous ( $yam_misc )
20% of CBLP will be allocated for miscellaneous development costs. These included: CBLP liquidity provision, auxiliary development costs, community building initiatives, partnerships, bug bounties etc
Airdrop
1% of CBLP will be allocated for the community airdrop.
NFBO
5% of CBLP will be allocated for the NFBO event.
Development Team ( $yam_team )
19% of CBLP will be allocated for the core development team.
Growth
The value of the CBLP token is primarily tied to the success and longevity of the Yamfore protocol. As Yamfore captures more market share, users, and liquidity, the demand for CBLP tokens will remain present and growing.
Yamfore generates revenue from a range of fees on all issued loans, including a CBLP flat fee, accrued interest repayments, and ADA staking rewards. This revenue is sent to the stablecoin treasury, which facilitates further loans and increases the number of borrowers that can be serviced. This influx of capital also drives growth for CBLP tokens in the secondary market, as more people seek to borrow from the newly available capital, thus having to acquire CBLP in the open market.
There is always a base lending rate that the market is willing to accept. When the CBLP flat fee exceeds this base rate, no individual is inclined to open a loan position, due to the unfavorable terms. This base lending rate is constantly changing and dependent on general market sentiment, as well as a host of other economic factors. It is the responsibility of CBLP token holders to ensure that the base lending rate is always appropriately set for the current market conditions through governance. One indicator of achieving this base rate is that the stablecoin treasury is always empty due to consistent demand.
Demand: As the protocol is continuously utilized by users seeking crypto-backed loans, the CBLP token which is required to utilize the protocol sustains demand, due to its utility.
Funding: The revenue generated from the CBLP flat fee, accrued interest repayments, and ADA staking rewards are all sent to the stablecoin treasury to facilitate further loans. This influx of funds increases the amount of capital available to be lent to borrowers.
Growth: This influx of capital drives growth for the CBLP tokens in the secondary market, as more people seek to borrow from the newly available capital, thus acquiring more CBLP in the open market.
The CBLP treasury is another key component to the growth attribute of the CBLP token. Yamfore holds an internal treasury that will initially contain 5% (50 million) of the total fixed supply of the native governance and utility token, CBLP. This treasury, known as the CBLP treasury, enables individuals to indirectly provide liquidity to Yamfore by depositing their stablecoins into the protocol’s CBLP auction portal. In return, individuals will acquire an allocation of CBLP tokens that is determined through fair market supply and demand mechanisms.
The CBLP treasury aims to accelerate the growth of the protocol’s stablecoin reserves by directly converting a portion of the value generated in the CBLP markets into stablecoins to facilitate further loans and increase the number of borrowers that can be serviced by the protocol. This is a long-term initiative that aims to accelerate the growth of the protocol’s stablecoin reserves in a self-sustaining manner without significant drawbacks to the price appreciation of the underlying CBLP token. The CBLP treasury’s vesting schedule is a lending parameter that can be controlled by CBLP token holders through governance.
The distribution of the CBLP tokens stored in the CBLP treasury occurs through the CBLP auction portal. At the start of each epoch, a set amount of CBLP tokens are made claimable from the CBLP treasury. Individuals can deposit stablecoins to the CBLP auction portal in between epochs to be eligible to claim a portion of those CBLP rewards at the start of the next epoch. Those stablecoin deposits go directly to the protocol’s stablecoin treasury and are immediately lent out.
The wallet addresses of all stablecoin depositors are given the right to withdraw a certain percentage of CBLP from the total amount of CBLP tokens made claimable at the start of a new epoch. The amount claimable by a wallet address is directly tied to the total value of stablecoin deposits made by the wallet during the previous epoch, when compared to all other depositors. For example, if a wallet address was responsible for 1% of the total value of all deposited stablecoins sent through the auction portal within an epoch, versus all other wallet addresses, an equivalent 1% of the total amount of CBLP tokens set to be claimable for that epoch will be redeemable for that wallet address at the start of the next epoch.
The CBLP auction portal event is continuously occurring with rewards being calculated and claimable on a per-epoch basis. This CBLP auction portal takes a fair supply and demand-driven approach to token distribution, similar to that of the NFBO.
To better understand the capital inflow of all the discussed financial mechanisms of the protocol, we have provided a visual diagram below that showcases the money flow and self-sustaining nature and growth of Yamfore.
Governance
Yamfore utilizes a unique and novel approach to governance called “Progressive Governance”.
Progressive Governance aims to enable more participation in decentralized governance by simplifying the process and removing the multiple points of friction that average DeFi users experience. For example, Progressive Governance eliminates the need for users to sign up for third-party forums or social media platforms in order to participate in governance. Instead, all governance activities are conducted on-chain, which ensures that the process is autonomous and neutral, and that all CBLP token holders have an equal say.
Below is the list of on-chain protocol parameters controlled via Progressive Governance :
Progressive governance remains a heavy work in progress, with more details scheduled to be released at a later date.
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 that operates independently on a blockchain. No single individual, organization, or governing body owns or controls the protocol. Instead, the holders of the CBLP token dictate the development and direction of the protocol. The Yamfore protocol is provided on a “use at your own risk” basis. No developer or entity involved in the creation or promotion of Yamfore is responsible for any damages or loss of funds resulting from the usage of the protocol. The Yamfore protocol will go through extensive internal testing and external auditing before launching. However, there is always a risk of an undiscovered bug or exploit residing in the protocol’s smart contracts. Depending on the severity of the bug or 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.
V. Conclusion
Yamfore represents an alternative lending model for smart-contract protocols providing crypto-backed loans. Its internal funding mechanism removes many of the counterparty requirements that exist in other traditional lending protocols, such as margin calls, ongoing interest payments, and high loan-to-value ratios. These innovations make Yamfore the first community-backed lending protocol that offers truly “set-and-forget” crypto-backed loans for anyone and everyone.
Follow Yamfore:
🌎 Website: https://yamfore.com/
📚 Gitbook: https://yamfore.gitbook.io/yamfore/
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🔊 Discord: https://discord.gg/FK5qtrmRE7
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📧 Email: contact@yamfore.com
