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Credit Delegation

Credit delegation allows a depositor to deposit funds in the protocol to earn interest, and delegate borrowing power (i.e. their credit) to other users. The enforcement of the loan and its terms are agreed upon between the depositor and borrowers, which can be either off-chain via legal agreements or on-chain via smart contracts.

This enables:

  • The supplier (aka delegator) to earn extra yield on top of the yield they already earn from the protocol,
  • The borrowers (aka delegatees) to access an uncollateralized loan.

Approving the delegation

The approveDelegation() or delegationWithSig() must be called by the supplier (delegator), approving the borrower (delegatee) a certain amount.

This is done for each debt token that needs to be delegated.

Borrowing the credit

The borrower (delegatee) calls the borrow() method on the Pool, using the supplier's (delegator's) address in final parameter onBehalfOf.

The borrower's available credit is reduced by the borrowed amount.

Repaying the credit

Anyone can repay the debt OnBehalf of the user, by calling one of the methods - repay() or repayWithPermit(). The supplier (aka creditor) can also use repayWithSpTokens() method to repay debt with their spTokens of the underlying debt asset in the same pool.