Repayment Vaults
One of the core stabilization modules in the Superseed Lending Protocol is the Repayment Vaults (RV). Borrowers who choose to manually repay their loans can do so directly, burning the stablecoin they initially minted as a loan. However, for supercollateral borrowers benefiting from self-repaying loans, the fees used for repayment are directed into a smart contract known as a repayment vault. This vault then systematically burns the debt of supercollateral users on a pro-rata basis according to a predefined schedule.
There will be multiple types of repayment vaults, each with a different repayment schedule.
- One-week repayment vault
- One-month repayment vault
- One-year repayment vault
- Four-years repayment vault
The benefits of Repayment vaults include reducing the volatility of the repayment rate by following a programatic schedule for burning the debt of supercollateral borrowers. Additionally RV act as a stablecoin sink, which the protocol can utilize to stabilize the peg. The fees collected are directed to either long-term or short-term vaults based on the demand for the stablecoin.
Stabilization mechanism
Repayment vaults are one of the most important features of the entire system.
Directing fees to short-term repayment vaults will increase the debt burn rate. While, when fees are directed to long-term repayment vaults, debt burns occur slowly.
The key is to algorithmically stabilize the token by directing capital flows toward both longer-term and shorter-term repayment vaults.