A Deep Dive into Decentralized Lending Systems

A Deep Dive into Decentralized Lending Systems

Glossary

Term DefinitionsTokenization PlatformA platform that supports the creation of virtual representations of goods, services, and/or experiences (also known as “VIRLs”). Virtual Item Representation (VIRL)A virtual representation of an item, which can be a good, service, or experience. TokenA digital mark that represents ownership of a specific item. Smart ContractA set of verifiable conditions stored on a distributed ledger that must be met to automatically execute a transaction related to the item represented by the token (e.g., transfer of ownership or expiration). Distributed LedgerAn electronic ledger that records transactions, which can be public or private, such as a blockchain. Side ChainA branch of a blockchain that branches off from the main distributed ledger that can store virtual representations of a specific class or category of items. Digital WalletAn application or interface that users use to store, manage, and trade their tokens. GuildA collection of individuals or organizations that perform specific tasks (e.g., identity verification, evaluation, and/or safekeeping) in the decentralized lending process and have expertise in a specific field. Sub-guilds are collections of members that derive from a guild and focus on a specific sub-field within the guild's area of ​​expertise. Governance is a set of rules and/or regulations to which one or more aspects of the decentralized lending process and participants must adhere. Short Answer Questions

What is the main function of a tokenized platform? The main function of a tokenized platform is to create and manage virtual representations of items (VIRLs) and tokens that represent these VIRLs. It allows users to trade, lease, buy, sell, exchange, or transfer items represented by these tokens in a secure and transparent manner.

What role does a distributed ledger play in a tokenized platform? A distributed ledger is used to record all transaction information related to tokens, such as token generation, ownership changes, and token destruction. Due to its decentralized and tamper-proof nature, it ensures security and transparency in token transactions.

What are smart contracts and how are they used in a tokenized platform? Smart contracts are self-executing contracts stored on a distributed ledger. In a tokenized platform, smart contracts can define the properties of a token, manage the life cycle of a token, perform ownership transfers, and implement other token-related functions.

What is the function of a digital wallet? A digital wallet is an application or interface that users use to store, manage, and trade their tokens. It allows users to view their token balances, send and receive tokens, and interact with applications and services that support tokens.

What is a "collateral token" in a decentralized lending system? A collateral token is a digital token that represents a physical asset provided by a borrower as collateral for a loan. Collateral tokens are typically locked in a smart contract for the duration of the loan to ensure that the borrower does not sell or transfer the collateral before the loan is repaid.

What is the purpose of a guild in a decentralized lending system? Guilds provide specialized services in decentralized lending systems, such as identification, evaluation, and safekeeping of specific types of collateral. Guilds exist to ensure that all aspects of the lending process are participated by experts with relevant expertise.

What is the difference between a sub-guild and a guild? A sub-guild is a collection of members that is derived from a guild and focuses on a specific sub-field within the guild's field of expertise. For example, a watch guild may have a sub-guild that specializes in identifying Rolex watches.

How does governance work in a decentralized lending system? Governance in a decentralized lending system is achieved through a hierarchical set of rules and protocols that define how all aspects of the system operate, including the formation of guilds and sub-guilds, the joining and exit of members, voting mechanisms, reward mechanisms, and more.

What is the relationship between system-level governance, stage-level governance, and guild-level governance? System-level governance defines the basic rules of the entire decentralized lending system, stage-level governance sets more specific rules for specific stages of the lending process, and guild-level governance sets more detailed rules for the operation of a specific guild. These governances are hierarchical, and lower-level governance needs to comply with the provisions of higher-level governance.

How do decentralized lending systems ensure that participants act in good faith? Decentralized lending systems ensure that participants act in good faith through a variety of mechanisms, such as: requiring participants to stake a certain number of tokens, using smart contracts to automatically execute agreements, and relying on the professionalism and reputation of guilds and sub-guilds to constrain member behavior.