> For the complete documentation index, see [llms.txt](https://cetra.gitbook.io/welcome/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://cetra.gitbook.io/welcome/cetras-products/hedging-module/the-lenging-module-principles.md).

# The lenging module principles

We don't want to be another lending protocol, but we want to have more borrowing capabilities to scale market-making vaults, so we decided to add the lending module. It will consist of 2 types of actors:

* Lenders\
  They will be able to stake their volatile altcoins, gaining returns based of pools utilization.
* Borrowers\
  In fact noone will be able to borrow tokens itself, but to enter delta-neutral vaults, that will borrow and keep tokens inside the protocol.

So effectively it can be thought as highly overcollateralized leding: user deposits his stablecoins as collateral -> volatile tokens are being borrowed from lending pools -> they are then deposited into market making vault and kept there safe.

Market making vault then can incur only losses caused by IL, that usually have scale of percent units, >10% when prices change by tens of percents and can go very bad only if one of underlying tokens fully collapses.

For now we only focus on USD-notioned yield, so initially only best stablecoins (USDC, DAI, USDT) will be added as collateral.\
To manage risks of tokens listed for lending and borrowing we'll look at:

* **Token liquidity on-chain and off-chain**\
  We'll only include tokens listed on major CEXes and DEXes, having at least millions of dollars locked as liquidity and decent trading activity.
* **Protocol's history and economic model**\
  Protocol is needed to be audited, having good hacks history and consistent economic model
* **Tokenomics**\
  Token design needed to be extensively examined to exclude unexpected unlocks and rug-pools 
* **Protocol's team, backers and treasury**\
  Will the protocol pay compensations for their users in case of collapse? Do they have enough funds in treasury to repay bad debt in case of their failure?
* **Oracle support**\
  Oracles are the key part of any lending protocol and liquidation process.
* **Insurance**\
  We plan to collaborate with isurance protocols as Nexus Mutual and InsurAce to protect users funds and need to know if they can work with specific token.