Clearpool is a decentralized capital markets system that enables institutional firms to access uncollateralized liquidity.
Clearpool has backing from investors like Sino Global Capital, Sequoia Capital, HashKey, and Arrington Capital among others. The Clearpool smart contract code passed audits and tests from Pessimistic Security and CertiK. Thus, showing their emphasis on security.
In this article, we will take a simple look at how Clearpool operates, and look at information about the borrowers on Clearpool. As well as, the possible risks and how Clearpool mitigates them.
🔎 Who are the borrowers on Clearpool?
👨‍🏫 ELI5: Borrowers are fully vetted, verified & KYC’d institutions. Their on-chain risk levels are monitored in real-time through our partner @xmargintrading. Borrowers must lock $CPOOL to launch a pool
Read more 👇https://t.co/rULtrTNx3Y
— Clearpool (@ClearpoolFin) May 30, 2022
How Does Clearpool Operate?
The liquidity pool on the Clearpool app is open for approved institutional borrowers that complete the know your customer (KYC) process with Clearpool. As well as, with one of its partners.
Notably, these liquidity pools are available for any interested user to deposit USDC and get rewards in CPOOL LP rewards. Users also get continuously compounded interest in USDC alongside the CPOOL LP rewards whenever a pool borrower decides to borrow liquidity from the pool. This makes the platform lucrative for DeFi lending.
Additionally, the interest a user earns comes from the amount of the pool the borrower is using. The more a borrower uses the pool, the higher the interest rate as the user is rewarded for risk increase. This is called the interest rate curve.
There is also a mechanism in place that prevents the borrower from using beyond 70%-85% of the pool. Thus, making it possible for lenders to remove their deposits whenever they choose to.
Info About Borrowers on Clearpool
The borrowers on Clearpool are institutional firms on the whitelist after completing their verification, due diligence checks, and KYC. They are usually established trading firms and crypto-native market institutions with good records.
Besides, these borrowers actively make markets in top cryptocurrency exchanges and mostly use a risk-neutral approach.
Clearpool’s partnership with X-Margin also helps with carrying out important checks on borrowers like real-time risk monitoring and credit scoring. Thus, helping Clearpool ascertain a borrower’s risk level.
In addition, Clearpool has a mechanism in place that requires certified borrowers to lock a given amount of CPOOL tokens. The first set of borrowers must lock 300,000 CPOOL tokens. Now, borrowers must lock the CPOOL equivalent of a proportion of the present TVL.
What are the possible risks?
There are risks in the system as Clearpool is an uncollateralized lending platform. Any user with funds in the system has counterparty credit risk of the borrower who borrows your money.
In other words, this risk is from the possibility of the borrower not being able to pay back the pool liquidity after a while. But, Clearpool ensures borrowers go through proper assessment and verification before allowing them launch a pool. However, this may not be enough.
To mitigate the effects of a borrower defaulting, Clearpool ensures:
- Institutions agree to higher interest rates as they are not providing collateral. These higher rates come via the CPOOL LP rewards. And they match the assessed risks.
- The creation of an insurance account for every borrower liquidity pool on Clearpool. This involves moving a little portion of interest on every block to an insurance account inside the smart contract. If there is a default, the pool LPs can choose to claim the total in the insurance account as compensation.
- Activate an auction. In this case, whitelisted bidders can place a bid for the pool’s total debt. The minimum bid must be equivalent to the sum in the insurance account. Afterward, the LPs will choose to accept or reject the winning bid via a vote.
$CPOOL Price Analysis
As of the time of publication, Clearpool price was $0.046906124056 with a 24-hour trading volume of $2,218,162. CPOOL price is down 5.2% over the last 24 hours. Besides, it has a circulating supply of 83 Million CPOOL coins and a total supply of 1 Billion.
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