🎦Protocol Overview
The architecture is composed of the following components:
On-chain loans
Institutional lenders that structure loans OTC to institutional borrowers shown above. These are segregated loans whereby the lender whitelists the borrower's address, chain, collateral type, LTV, rate and term as well as the contract calls the loaned assets can engage with and whether it faces a market maker and is delta-neutral.
Lending pools
These are on chain wallets and vaults of the following types:
Segregated credit pools: permissioned and lender specific on-chain credit facilities with specific risk constraints. For example, we could create a credit facility that is only underwriting delta-neutral basis strategies on ETH MainNet.
Integrations on top of DeFi-native lending protocols such as Clearpool, Maple, Morpho, Term or Aave.
August operated public pools (USDC, ETH, WBTC): permissionless and composable DeFi pools.
Wallet (Subaccounts)
This is the core smart contract wallet. It is owned by the customer with select exposed functions to the risk-engine such as liquidation or the ability emergency unwind a position.
Strategy contracts
Adapters on top of existing DeFi protocols. Protocols supported include Aave, Compound, Curve, Convex, Uniswap, GMX, Paraswap, 1inch as well as all of their forks on different EVM chains.
Structured product contracts: total return swap, interest rate swap, forwards and options. These contracts rely on an off-chain pricing feed between two counterparties and automatically handle margining.
Account Abstraction
Similar to Gnosis Safe, August wallets can connect to any DeFi protocol via wallet-connect account abstraction. Users are able to set contract call level whitelists and permissions and interact with any DeFi protocol on any EVM chain.
Risk engine
The risk engine is a software module that monitors the health of August wallets, triggers margin calls, and liquidates customer positions should this be required. This logic is running off-chain and has permissions to perform the required operations on-chain. As it reaches maturity, the risk-engine will become an oracle and relayer network storing data on a data-availability layer with a fully on-chain liquidation market
We have built our underwriting framework for each asset based on an adaptation of the CME’s SPAN Methodology including parameters such as volatility and price ranges, cross-asset correlation, holder distribution, and order book depth. We intend to make these standardized ratings public and leverage them as public marketing good for the space.
The August team is currently running the risk engine but will enlist external partners to run it once we open our risk engine SDK.
Insurance Pool
The initial capital base will come from lenders/LPs in exchange for yield. As the network gains traction, part of the network fees will be used to fund the insurance pool until it becomes self-sustaining.
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