# Introduction
LODA Cicero is a decentralised borrowing and lending protocol that enables uncollateralized lending both for on-chain and off-chain borrowers alike. \
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Loda Cicero is based on three different liquidity pools, which are all co-dependent on each other. Incentives for capital efficiency in these pools are dynamic & based on the needs of the protocol. \
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In addition to these pools, staked Loda tokens are designed to backstop the protocol to both defend & create aligned incentives for all participants.
The governance of the protocol is mandated by the Lode Cicero DAO, which is controlled by holders of the two tokens - LODA & LODESTAR
These documents are designed to help you get a basic understanding of how the protocol functions.
# Terms
**Uncollateralized Lending**
Type of lending where there's no collateral used to back the loan, but instead, other mechanisms are used to secure the loan.
**LODA Token**
Token that can be staked into the Insurance Liquidity Pool (ILP) to mint Lodestar.
**LODESTAR Token**
Non-transferable governance token that can be used to vote for proposals to direct the governance of the DAO. They are minted by staking LODA into the ILP and can be burned to retrieve Loda from the ILP.
**Cool-off Duration**
Is the time it takes between intent to withdraw and actual withdrawal when investing in the ILP. Once the intention to withdraw has been made, you lose the ability to vote.
**Maturity Date**
The date when an investment becomes due and is repaid to the investor
# FAQs
What is the Junior Pool(JLP)?
The JLP is where approval of loans happen, and comes with the highest rewards per USDC, since it is the first loss capital.
What is the Senior Pool(SLP)?
The SLP is the lowest risk pool and works to pay the remainder of a loan, once 20% of a loan has been approved by backers of the JLP. Since the risk is lower, the pool rewards are lower as well.
What is the Investment Pool (ILP)?
The ILP is where you stake the LODA token, which rewards you with the LODESTAR token (governance token). The ILP works to defend the SLP investments from defaults.\
How does Governance work?\
Voting power comes from holding the LODESTAR token which is minted by staking LODA in the ILP.
# Investment Pools
LODA Cicero offers three different types of investment pools: Insurance Pool (ILP), Senior Pool (SLP) and Junior Pools (JLP). \
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These pools are designed for different participants, but are co-dependent on each other, and the incentive structure of the pools reflects this.
# ILP - Insurance Pool
The Insurance Liquidity Pool (ILP) is designed to insure the SLP, while also building a moat to defend the protocol from potential defaults.
The main focal points of the ILP are:
* To provide insurance to the SLP investments.
* To provide up to a 90% investment, depending on the health of the ILP.
* To allow LODA token holders to mint the Lodestar voting token by investing in the ILP.
* To generate yield on the staked Loda through the Lodestar token.
### Details
**Investment Token**: LODA
**Proof of Investment Token**: LODESTAR
**Cool-off Period**: Each investment has a cool-off period (refer to terms)
**Who Can Invest?**
Anyone - There are no minimum or maximum investment caps.
**Size**
* ILP has no size limit.
* ILP should maintain a ratio of 50% of the SLP.
**Risk**
The ILP function to insure the SLP in case of defaults, by providing partial insurance cover.
**Returns**
* Revenue comes in the form of ILP fees.
* Better returns per USD invested compared to SLP, however, less than the JLP.
* People that provide USDC to the ILP pool in the case of imbalance will be provided with rewards - the longer the imbalance, the better the rewards.
### **Process**
#### Voting Power
In the case of governance votes proposed by the DAO, there is voting power provided to holders of all ILP investment positions. The voting power of each position depends on the amount of future staking days left until the maturity date. The power reduces the closer the position gets to maturity.
Future staking days left voting power is capped at 365 days, to avoid multi-year investments accruing too much power.
#### Cooling-off Period
This is the duration between deciding to withdraw your LODA by burning your LODESTAR.
# ILP Rewards
### Strategies
Rewards in the ILP grow exponentially proportional to the amount of LODA invested into the pool. In the ILP there are two types of reward strategies:
#### Initial Rewards Strategy (IRS)
The IRS strategy provide rewards per LODA invested in the ILP, without a daily limit. This is done to encourage early Loda staking where the pool is not actually insuring anything.
#### Maturity Rewards Strategy (MRS)
The MRS stategy will unlike the IRS have an upper limit of rewards. These rewards will be distributed between the ILP and SLP based on the current pool and healthy pool ratio.
#### USDC to LODA and vice versa Conversion
**LODA to USDC** conversion will happen in case of defaults. USDC can be borrowed from the treasury by pledging LODA tokens, so they never enter the open market or be bought from the open market directly by selling LODA.
In case of pledging, then the ILP contract is responsible for buying back all the pledged tokens at the pledged at price.
**USDC to LODA** conversion when collecting ILP fees as USDC and adding it to the ILP as LODA tokens.
# Dynamic ILP Insurance Cover
The ILP insurance cover is dynamic and is based on the current health of ILP. The more defaults the ILP has to handle the worse its health becomes. Conversely, the more ILP fees are collected, the better ILP health becomes.
### Loan Default Percentage (LDP)
LDP calculates how much of the loan book size in USDC will default by %. This number, in the beginning, will be an industry-accepted number and will change according to the DAO, as well as the historical performance of the platform.
Balancing the LDP ratio: If less USDC than LDP target - Investors can deposit USDC in the ILP to earn LODESTAR.
**What if the ILP is performing badly?**
The treasury can issue an IOU to the ILP to cover the falling LDP ratio, by providing USDC until an investor invests the required USDC to cover the ratio. The treasury can use up to 20% of its size for this purpose.
# SLP - Senior Liquidity Pool
The Senior Liquidity Pool is a liquidity pool that covers the extra principal required once JLP targets are met.
The investments in SLP are insured by the ILP.
The SLP can be seen as a comparitvley safer investment strategy as compared to the ILP and JLP.
### Details
**Investment Token**: USDC
**Proof of Investment Token:** SLP Token
**Who Can Invest?**
* Everyone is able to invest in the SLP
* No auditing responsiblities over loans funded.
**Size**
* Max 80% of the loan principal - without a lower limit.
* The size of the SLP is determined by the size of the JLP
**Risk**
* Partially insured by the ILP
* Lower risk compared to ILP/JLP
**Returns**
* SLP is paid back principal and interest before the JLP, and before the ILP fees.
* Lowest returns per USD invested, but least exposure to potential defaults.
# SLP Design
**LogicalyAvailableUSDC (LAUSDC)** - Tracks the amount of USDC that can be lent, or has already been lent
**LogicallyUnavailableUSDC (LUUSDC)**- Tracks the amount that can't be lent - IE. USDC deposits that have reached maturity and is waiting to be withdrawn from depositors.
**SLP deposit receipt** - The fungible token of the SLP
**TotalSLPTinCirculation** - Tracks the total amount of SLPTs that have currently been minted
**SLPT Price Calculation**
**SLPT Price Impacts**
***Minting*** - SLPT price doesn't change
***Burning*** - SLPT price doesn't change
***Loss** -* USDC amount locked fall, but SLPT in distribution doesn't.
***Profit on repayment*** - USDC amount locked increase, but SLPT in distribution doesn't
**SLP Maturity**
When an investor invests in the SLP they have to specify the amount of USDC and the maturity date. The maturity date is either 180, 360, or 720 days. The investor is not allowed to withdraw funds before maturity. Post maturity date the funds can be withdrawn at any time.
When withdrawing funds the following scenarios can occur
* The SLP will have enough liquidity to process SLPT burn requests, and return USDC
* The SLP will not have enough liquidity available.
To ensure there's enough liquidity 90% of the SLP is allowed to be illiquid and loaned out for loans - while 10% will be kept liquid in a pool.
In the case where more than 10% is being withdrawn in the SLP, there will be a queue system. Investors will be served on a first come first served basis, whenever liquidity becomes available again.
A place in the queue is held for 24 hours before you'll need to queue again. In the case of a withdrawal from the queue, the current SLPT price will matter, and not the price from when the investor first joined the queue.
# JLP - Junior Insurance Pool
Once a JLP is opened, all public information about the loan and an expiry timestamp will be released. If the JLP reaches its target before expiry then the SLP automatically deplys the remaining capital required.
### Details
**Investment Token**: USDC
**Proof of Investment Token**: JLP receipt.
#### Who Can Invest?
* Everyone is able to invest in the JLP, however, each investor is assigned a reputation.
* The maximum amount of allowed investment is based on the investor's JLP reputation (covered in Loans → Process)
* A new JLP investor can only invest up to 5% of the pool size, the upper limit per investor overtime is 15%
**Size of Pool**
* Minimum 20% of loan principal, no upper limit
* The size of the JLP is determined by the DAO
#### Risk
* In case of a default, JLP is first used to cover losses (first loss capital)
* The last pool to be paid back
* JLP has the highest risk out of any of the three pools
**Returns**
* The investment duration is longer than the SLP and ILP since the principal is returned after the SLP principal and profits are, as well as the ILP fees.
* The JLP has the highest returns per USD invested compared to the SLP and ILP
# Loans
### **Process**
**Pre-approved Borrowers**
Loda Cicero will build an initial list of pre-approved borrowers. Any of these borrowers can create a loan at any time that directly goes to ILP voting and on being approved, a JLP is launched.\
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If for whatever reason these borrowers are negligent in their duties of repaying the loans, or other, the DAO may choose to remove this whitelisting.
**Approval**
Once a new JLP is launched. JLP investors are allowed to invest in the JLP based on their reputation. The better the reputation, the more they are allowed to invest in the JLP.
**Reputation**
Reputation is based on two reputation indexes:
**Auditor Experience Value (AEV)**
AEV is calculated by the total JLP value repaid/or not repaid.
**Auditor Accuracy Value (AAV)**
Tracks the success of a JLP investor
**Activation**
Once the loan is activated the SLP covers the rest of the loan principal needed. If the JLP threshold is 30% of the principal then SLP will add the remaining 70% and the loan will be activated. At this point, the borrower will receive the funds in the nominated wallet address.
### Repayment
**Repayment Size and Duration**
As part of the borrower terms, repayment duration and repayment value will be defined. The borrower has to adhere to this repayment schedule.
**Hierachal Repayment Order**
The repayment happens in the following order.
* SLP is paid its principal amount
* SLP is paid its interest
* ILP is paid its fees
* Treasury is paid its fees
* JLP is paid its principal
* JLP is paid its interest
# Treasury
The treasury of the LODA platform is a safeguard to ensure "rainy day" funds when needed.
The treasury stores its funds in USDC and charges a fee for every successful loan application and repayment.\
## Details
**Size**
* Treasury has no pool size limit
* Treasury may initially be seeded by a loan/capital investment by Loda governance from TGE sale
# Rewards
### SLP
SLP pools will have extra rewards given out in form of LODA tokens. The pools will contain a per USDC or per LODA reward earned every day.
### JLP
JLP pools will have extra rewards given out in form of LODA tokens. The pools will contain a per USDC or per LODA reward earned every day.