Lending Model

How Varla's single-pool lending architecture works — from supply flows and borrow mechanics to interest accrual and protocol reserves.

✦ Key Takeaways

Single pool per chain — all lenders share one ERC-4626 vault per deployment
Floating rates — utilization-based kinked curve, updated every interaction
Cross-margin borrowing — multiple PM positions as collateral, one health factor
10% reserve cut — portion of interest funds a first-loss buffer for lenders

How the Pool Works


Lender deposits USDC ──► VarlaPool (ERC-4626 vault)
                                  │
                                  ▼
                         Available Liquidity
                                  │
Borrower deposits PM positions ──► VarlaCore (collateral escrow)
Borrower calls borrow() ─────────► Draws from pool liquidity
                                  │
Interest accrues ────────────────► 90% to lenders, 10% to reserves

For Lenders

Lenders deposit stablecoins (USDC on Polygon, USDT on BSC) into the VarlaPool vault. In return they receive vault shares (ERC-4626) that appreciate as borrowers pay interest. Withdrawals are subject to available liquidity — if the pool is fully utilized, lenders queue withdrawals until borrows are repaid or new deposits arrive.

For Borrowers

Borrowers deposit prediction market positions (ERC-1155) as collateral into VarlaCore, then borrow stablecoins up to their weighted LTV limit. Interest accrues continuously (per-second) and compounds automatically via a global borrow index.

Deep Dives

Supply & Borrow

Step-by-step flows for depositing, borrowing, and the mechanics behind each operation.

Interest Rates

The kinked utilization curve, rate parameters, and how APY is calculated.

Reserves

Protocol reserve fund, first-loss coverage, and bad debt handling.