High Level Architecture

Key Terms

Vault: A Vault is an investment vehicle for a single underlying asset, such as USDC or WETH

longZCB: A token that accrues junior tranche returns of the underlying instrument. These are concentrated and levered bets on a single instrument. They are programmed such that the purchaser’s collateral would be used as first loss capital.

shortZCBa tokenized borrow+sell position of longZCB. Pays off positively when the instrument fails to be profitable, akin to a credit default swap.

Instrument: A Universal Creditline or a Universal Lending pool

Example Vault

A vault investor is exposed to a senior tranche of all instruments(lending pools or creditlines) attached to the vault. Idle capital would be invested in a low-risk and liquid yield source.

Borrowers will either borrow instantly from an isolated lending pool that is liquid and supports his collateral, or they can propose an individual credit line to be approved.

How much capital is allocated to each instrument is determined by the amount of leverage(buying longZCB) managers are willing to take minus the aggregate amount of protection vault investors wish(by buying shortZCB) for the said instrument.