Loan Instrument

A financial instrument that provides liquidity for investors or allows foundations to earn interests on excess capital.

Use Case Description

The system will allow Makers to create new loan issuance, and allow Takers to engage the outstanding loan .

Actors

• Maker, who is the lender of the loan. Usually the Foundation who wants to provide liquidity to token investors;

• Taker, who is the borrower of the loan. Usually the token holders who want liquidity;

• Timer Oracle, who is an external timer service provider that provides timing triggers to the loan contract.

Preconditions

• Financial Service Providers have created loan instruments on the NUTS Technology Platform;

Process Flow

The diagram below depicts the process flow of the loan contract.

Main Process Flow

• Maker creates new loan issuance using the selected loan instrument;

• Maker deposits the borrowed token to the loan issuance;

• Taker searches loan issuance in the marketplace and engages to the target issuance;

• Taker deposits the collateral token. The borrowed token is available for withdrawal by the taker;

• Taker pays back the borrowed token plus interest token; the collateral token is available for withdrawal by the taker.

Alternative Process Flow

• If the maker fails to deposit the borrowed token in time, the loan issuance becomes unfunded;

• If the loan contract expires with no engagement, the loan issuance becomes complete with no engagement and will not be available for further engagement;

• If the taker fails to pay back the borrowed token plus interest, the loan issuance becomes delinquent.

Loan States

Below are the states of a loan contract.

• Initiated: The loan issuance is created;

• Engageable: The maker has deposited the borrowed token so that the loan issuance can be engaged by taker;

• Active: The taker engages the loan issuance;

• Complete Engaged: The taker pays back the borrowed token in time;

• Unfunded: The maker fails to deposit the borrowed token in time;

• Complete not Engaged: The issuance expires with no engagement;

• Delinquent

  • The taker fails to deposit the collateral token in time;

  • The taker fails to pay back the borrowed token in full in time.