Technical Concepts

Overview

Liquidium implements a lending protocol similar to Aave, with adaptations for the Internet Computer's unique execution model. The technical concepts include:

Interest Rates

The protocol uses a two-slope kink model where interest rates increase gradually until an optimal utilization point, then accelerate sharply. This incentivizes maintaining healthy pool liquidity.

Share-Based Accounting

Instead of tracking individual user balances, the protocol uses shares and indices. Users hold shares that represent their proportion of the pool. Global indices grow over time to reflect accrued interest, making balance calculation as simple as balance = shares × index.

Health Factor

Every borrowing position has a health factor that measures its safety. When collateral value drops relative to debt (health factor < 1.0), the position becomes eligible for liquidation.

Liquidations

External liquidators can repay a portion of underwater positions and receive the borrower's collateral at a discount. This mechanism ensures the protocol remains solvent even during market volatility.