Ajna empowers users by allowing anyone to create a credit pool for almost any asset pair, including NFTs.
Ajna Lending Protocol
The Ajna protocol is an open source decentralized software that makes it easy to issue peer-to-pool collateralized loans on Ethereum and other compatible networks.
Ajna solves the problems of existing lending protocols
● No protocol-level governance. Once deployed, the protocol becomes immutable and parameter adjustments are only automatic due to market forces.
○ Pool utilization determines interest rates.
○ Lenders determine collateral ratios.
● No price feeds.
○ Lenders determine the prices at which they value collateral.
○ Liquidation bonds incentivize liquidators to do the work of oracles.
● Permissionless pooling allows anyone to create pools with almost any collateral and token.
○ Less popular assets, NFTs and NFT collections can be used as collateral without the need for whitelisting.
● Permissionless pool creations allows short markets to be created for any ERC-20.
○ No NFT short markets as denomination of interest in NFTs is not possible.
Borrow
At Ajna, loans are made for an unlimited duration with an automatic variable interest rate and can be secured by almost any tokenized collateral, as long as there is someone willing to borrow.
Borrowers take out loans by providing collateral and withdrawing quote tokens. If they use an NFT as collateral, they must pledge the entire NFT. The borrower can add or withdraw collateral at any time, as long as doing so does not cause their loan to be undercollateralized.
Loans have a minimum loan amount, origination fee, and a liquidation penalty.
Lending
In Ajna, lenders choose what valuation they are willing to lend against by contributing quote tokens at certain prices. They are credited with Liquidity Provider Balance (LPB) units, which can be minted as non--fungible tokens (NFTs), which are a transferable version of their balance sheet.
All deposits above the lowest usage price (LUP) or threshold price (TP) of the least secured loan, known as the highest threshold price (HTP), earn interest at the same rate, while deposits below earn no interest. The threshold price of each loan is set by the borrower and is the amount of debt divided by the amount of collateral. The LUP of the pool is defined as the lowest price of collateral that someone is actively borrowing against.
Liquidation
Ajna requires the posting of a bond to initiate liquidation. The purpose of the bond is to prevent unfair liquidation of borrowers. The neutral price (NP) of the loan is set at origination and acts as the liquidation price. If the auction sells the collateral for more than the liquidation price of the position, some or all of the bond is lost. If the auction sells the loan for less than the liquidation price, the bond is returned plus interest. In practice, a loan can be profitably liquidated when the market price of the collateral falls below the liquidation price.
Interest rates. In Ajna, interest rates are determined by the utilization of the pool. When there is a surplus of lenders, rates are reduced and when there is a shortage, rates are increased.
Reserve auctions. Ajna pools receive a portion of all interest income. These funds are accumulated in pool reserves, expressed in quoted pool tokens. Periodically, a portion of the reserves is sold for AJNA tokens in a Dutch auction. The protocol continually burns through the proceeds, which over time reduces the total supply of AJNA tokens.
