Liquidity-Risk-Based Tranche Lending Pool ( Mode 1)

Injecting liquidity into the lending pool will receive interest rewards.

When injecting funds, to meet the varying preferences of users regarding liquidity risk, users will face two identity choices: senior player or junior player.

Senior Player: When injecting USDC/USDT into the lending pool, users can choose the senior tranche to become senior players and will be issued an equivalent number of rebaseing ARKS-Sr tokens. ARKS-Sr token is a token that automatically increases in quantity with the injection of interest into the Lending Pool, and the exchange ratio with USDC/USDT always maintains at 1:1. The rebase coefficient of ARKS-Sr token is lower compared to ARKS-Jr, but the liquidity risk is lower. When the utilization rate of the USDT pool reaches 85%, senior players will not be able to withdraw any funds. ARKS-Sr can be pledged on the Account page to obtain experience value bonuses and token incentives.

Junior Player: When injecting USDC/USDT into the lending pool, users can choose the junior tranche to become junior players and will be issued an equivalent number of rebaseing ARKS-Jr tokens. ARKS-Jr token is a token that automatically increases in quantity with the injection of interest into the Lending Pool, and the exchange ratio with USDC/USDT always maintains at 1:1. The rebase coefficient of ARKS-Jr token is higher compared to ARKS-Sr, but the liquidity risk is higher. When the utilization rate of the USDT pool reaches 75%, junior players will not be able to withdraw any funds. ARKS-Jr can be pledged on the Account page to obtain experience value bonuses and token incentives.

Every time interest enters the USDT pool, the ARKS-Sr and ARKS-Jr tokens held by advanced and junior players will automatically rebase, and the specific rebase formula is as follows:

X is the number of ARKS-Sr tokens

Y is the number of ARKS-Jr tokens

Z is the interest injected into the lending pool

β is the interest coefficient, 1-β represents the proportion of interest extraction, and the income from this part will enter the treasury

r is the risk distribution coefficient, which represents that a certain proportion of interest among advanced players is redistributed to junior players

α(Sr) is the rebase coefficient of ARKS-Sr tokens held by advanced players

α(Jr) is the rebase coefficient of ARKS-Jr tokens held by junior players

A is the price of NFT during liquidation

B is the principal portion of the total debt of NFT during liquidation

Example:

At time T(0), user 1 and 2 choose to become senior and junior players respectively, and inject 10000 USDC/USDT each. At this time, the number of X (ARKS-Sr) tokens is 10000 and the number of Y (ARKS-Jr) tokens is 10000.

At time T(1), user 3 borrows 10000 USDC/USDT from the lending pool. At this time, the number of X (ARKS-Sr) tokens is still 10000, the number of Y (ARKS-Jr) tokens is still 10000, Z is 0, and the number of ARKS-Sr and ARKS-Jr tokens held by users 1 and 2 does not change.

One possibility: At time T(2), user 3 repays the principal of 10000 and interest of 1000 USDC/USDT to the lending pool. At this time, Z is 1000, A-B is 0, β is 0.8, and r is 0.6. According to the above formula, α(Sr) can be calculated as 1.024, and α(Jr) can be calculated as 1.056. In the next moment, the number of ARKS-Sr tokens and ARKS-Jr tokens held by users 1 and 2 will automatically expand to 10240 and 10560 respectively. Users A and B can exchange 10240 and 10560 USDC/USDT from the lending pool, thereby realizing interest income.

Another possibility: At time T(2), user 3's NFT enters the liquidation state due to failure to repay interest in time. When the liquidation is completed, Z is 0, A-B is -1000, β is 0.8, and r is 0.6. According to the above formula, α(Sr) can be calculated as 0.97, and α(Jr) can be calculated as 0.93. In the next moment, the number of ARKS-Sr tokens and ARKS-Jr tokens held by users 1 and 2 will automatically expand to 9700 and 9300 respectively. Users A and B can exchange 9700 and 9300 USDC/USDT from the lending pool. Different effects of bearing loss risks for different player identities have been achieved.