Mutualization on Zoth
Mutualization of Yield / Rewards
Mutualization in this context allows us to create a pool of interest or reward rates that offers exciting opportunities for both borrowers and investors.
Zoth has three key participants: the Borrowers, the Lenders and Liquidity Creators. Let's delve into the process step by step:
- 1.Borrowing: As an borrower, you may require funds for various purposes. Our platform connects you with Zoth that provide loans to cater to your financial needs effectively.
- 2.Liquidity Creation: Instead of having individual APY or reward rates, mutualization allows us to create a unified pool of APY or reward rates. This pool offers enhanced liquidity and investment opportunities to our users.
- 3.Interest Basis: Investors can participate in the lending pool. Each user's interest or reward rate (Qi) is associated with a specific value or percentage (Pi). The total value of the pool (V) is calculated as the sum of all contributions: V = Sum(Pi * Qi).
- 4.Mutualized APY/Rate: To represent the pool, we establish a mutualized interest or reward rate that reflects the combined pool's characteristics. This mutualized rate (Pm) is determined by dividing the total value of the pool (V) by the number of contributors (Qm): Pm = V / Qm.
- 5.Returns and Contributions: As an borrower, you are entitled to a portion of the mutualized APY or reward rates based on your original contribution. The amount of mutualized APY or reward rates you receive (Ri) can be calculated using the formula: Ri = (Pi * Qi) / Pm.
- 6.Ongoing Mutualization: The process of mutualization and demutualization is continuous. If additional contributors (j) wish to join the existing mutual pool, their allocation of mutualized interest or reward rates (Rj) will depend on the current pool value (V), the number of contributors, and their new contribution. The formula for calculating Rj is as follows: Rj = (V + Qj * Pj) / Pmut - Qmut.
By embracing mutualization the investments, we enable creating a ecosystem based on ZAT which is backed by the tokenized collateral on Zoth.