In early March 2022 Atlendis Labs published the whitepaper for version 1 of its protocol. It is still one of the clearer write-ups of how an uncollateralized lending market can be structured on-chain, and the design choices explain both what made Atlendis different and why the model was hard to scale.
Credit lines as bond issuance
The whitepaper treats borrowing as issuing bonds. An approved borrower can issue bonds repeatedly up to a preset credit limit, without posting collateral, much like drawing on a revolving line of credit. Each issuance has a fixed rate set at the moment of borrowing, which does not change until maturity, although the next issuance can carry a different rate.
One pool per borrower
Unlike shared lending pools, every borrower has its own pool for each asset. Funds are never mixed between borrowers, so a lender is exposed only to the borrowers they chose. Pool parameters such as maturity, asset and maximum borrowable amount are agreed when the pool is opened.
Rate discovery through ticks
Instead of an algorithm setting interest rates from utilization, each borrower pool works like a limit order book. The pool is divided into ticks, sub-pools that each correspond to a specific lending rate. Lenders deposit at the tick that matches their own risk assessment.
The whitepaper illustrates this with a pool capped at 10 million. If the borrower draws 4 million, the loan is filled from the cheapest ticks first, and the borrowing rate is the volume-weighted average of the matched ticks, 7.5% in that example.
Lender positions as NFTs
Each deposit is recorded as an ERC-721 token describing the lender’s chosen rate, the amount of bonds held (the amount due at maturity) and any unused deposit. Unused funds were placed on Aave, where they earned yield plus liquidity rewards paid by the borrower.
Strengths and weak points of the design
- Strength: lenders price risk themselves and are never pooled with borrowers they did not choose.
- Strength: fixed rates per issuance make borrowing costs predictable.
- Weak point: each borrower needs its own pool and its own lenders, which fragments liquidity.
- Weak point: without collateral, the protocol depends entirely on off-chain vetting and legal recourse when a borrower fails to repay.
The V2 release in 2023 kept the order book and NFT positions, but added more flexibility, including early exit for lenders and loan rollovers for borrowers.
Sources
- DefiLlama: Atlendis protocol page
- CryptoSlate: Atlendis Labs announces the launch of the Atlendis Protocol V1 (press release, 7 June 2022)
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