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Peridot

How Peridot Works

Peridot creates efficient money markets for crypto assets with algorithmically determined interest rates based on supply and demand.

Launch App

Introduction to Peridot

Peridot introduces a decentralized protocol on multiple blockchains that creates money markets for crypto assets. Our goal is to establish algorithmically determined interest rates based on supply and demand, allowing users to seamlessly trade the time value of their crypto assets.

Current limitations in existing systems include:

  • Limited borrowing mechanisms for crypto assets
  • Negative yields due to storage costs and risks
  • Reliance on centralized exchanges (security risks, limited access, virtual positions without on-chain usability)
  • High costs and low convenience with peer-to-peer solutions

Peridot solves these problems through an automated, decentralized system with transparent interest calculation and immediate liquidity across multiple blockchains.

How the Peridot Protocol Works

Peridot creates separate markets for various crypto assets across multiple blockchains, including Ethereum, Polygon, Avalanche, and more. These markets are transparent, publicly accessible, and provide complete transaction history and interest rates.

Asset Supply (Supplying Assets)

Users provide assets to the protocol and receive cTokens in return.

  • cTokens represent a growing share of the underlying asset as interest automatically accumulates
  • Liquid: Assets can be withdrawn at any time without waiting for a specific loan to be repaid

Primary Use Cases:

  • Long-term investors ("HODLers") can generate interest on their unused assets
  • dApps and exchanges can monetize their token holdings

Borrowing (Borrowing Assets)

Loans are completed simply and without negotiations, with no terms or waiting periods required.

  • Borrowers deposit cTokens as collateral to borrow assets
  • Each market has a variable interest rate depending on supply and demand

Collateral:

  • Each asset is assigned a collateral factor between 0 and 1 (highly liquid assets have higher factors)
  • The total amount of collateral determines the maximum loan amount ("Borrowing Capacity")

Risk and Liquidation:

  • If the loan amount exceeds the allowed capacity, other users can repay loans and purchase collateral at a discount ("liquidation discount")
  • This motivates arbitrageurs to minimize risks for the protocol

Primary Use Cases:

  • dApps can immediately borrow tokens for on-chain activities
  • Traders can take out loans to finance new investments
  • Short trading: Traders borrow tokens, sell them on the market, and profit from falling prices

Interest Model and Liquidity Incentives

Peridot uses an automated model to set interest rates based on usage ("Utilization Rate"). Interest rates rise with high demand and fall with low demand. This creates natural incentives for liquidity without having to guarantee it.

Implementation and Architecture

cToken Contracts (ERC-20 compatible)

Essential functions of the cToken contracts are:

  • mint: Deposit assets for cTokens
  • redeem: Withdraw assets by returning cTokens
  • borrow: Take out loans against cTokens as collateral
  • repayBorrow: Repay a loan
  • liquidate: Liquidate over-indebted positions

Interest Mechanism

  • The interest rate updates dynamically per transaction (block-based)
  • Total debt and reserves are increased through accumulated interest

Loans & Liquidation

  • Users can take out and repay loans at any time, with interest calculated continuously
  • If collateral is insufficient, a liquidation function allows exchanging collateral for loan repayment

Price Feeds & Comptroller

  • A price oracle provides prices for all supported assets from the ten largest exchanges
  • The Comptroller is a central control instance that ensures all actions are valid and adequately secured

Governance

Peridot starts initially centrally controlled and transitions long-term to full community control:

  • Addition of new markets
  • Adjustment of interest models
  • Management of price oracles
  • Withdrawal of reserves
  • Management of admin rights, later through a DAO

Summary

  • Peridot creates effective money markets for crypto assets across multiple blockchains
  • Interest rates respond dynamically to supply and demand
  • Users generate interest by providing assets without having to trust central entities
  • Loans can be taken out immediately, with assets serving as collateral
  • Peridot addresses critical deficiencies in existing blockchain-based financial markets and promotes a stable, decentralized financial infrastructure
Launch App