Advancing Decentralized Finance: A Comprehensive Pool-Based Liquidity Protocol

Abstract

In this paper, we introduce a pool-based liquidity protocol designed to enhance the accessibility and scalability of decentralized finance (DeFi) on smart contract-enabled blockchains. This user-friendly solution addresses the limitations of traditional financial systems by streamlining lending and borrowing operations, ultimately promoting broader adoption of DeFi beyond technology enthusiasts. The core protocol components encompass lending and borrowing managers and a liquidation manager to ensure the timely initiation of liquidations under unfavorable conditions. We also discuss various interest rate models to optimize the protocol's performance. To further advance the project's decentralization and governance, we advocate for establishing a decentralized autonomous organization (DAO) and exploring the potential integration of flash loans functionality. By offering an accessible, versatile, and robust DeFi platform through our pool-based liquidity protocol, we aim to accelerate the adoption of decentralized finance and extend its benefits to the broader population.