Mathematical BERAvency Guarantees

Core Innovation

Osito's primary innovation is calculating safe lending limits without relying on oracles, governance, or price feeds. Instead, it uses pure on-chain mathematics to answer a fundamentally different question:

Traditional Protocols Ask:

"What is this token worth?"

Osito Asks:

"In the worst-case scenario, how much BERA could be extracted from the protocol?"

The Core Formula

max_borrow = pool_BERA - (dumpable_tokens * pool_BERA/pool_tokens / 2)

Where:

  • pool_BERA: BERA locked in the liquidity pool by burned LP tokens
  • pool_tokens: Quantity of tokens locked in the pool
  • dumpable_tokens: total_supply - pool_tokens - total_staked - total_deposited

What This Means:

This formula calculates the worst-case scenario where all circulating tokens (not in the pool, not staked, not deposited as collateral) are dumped into the liquidity pool at once. It applies a linear decay model to estimate the price impact, with the division by 2 representing average price slippage during the dump.

Three Key Protocol Roles

BERA Lenders

Deposit BERA to earn interest

  • Interest scales with utilization
  • Can withdraw until 100% utilization

Token Depositors

Use tokens as collateral to borrow BERA

  • Can withdraw until position debt = position max borrow
  • Borrow power is proportional to deposit share

Token Stakers

Stake tokens to earn yield without debt

  • Reduce dumpable supply without diluting borrow power
  • Can withdraw until total debt = max borrow

Staker's Role in Protocol Safety:

Stakers play a crucial role in improving the protocol's economics. By staking tokens, they reduce the dumpable supply without diluting the borrow power per token. This increases the global max borrow limit, making the protocol more capital efficient while maintaining safety.

Real-Time Calculations

The protocol recalculates borrowing limits in real-time with each interaction:

  • Fresh pool data is fetched at the exact moment it's needed
  • No oracles or off-chain data feeds are required
  • Calculations use current on-chain state rather than historical data
  • All parameters auto-adjust based on natural market movements

This "just-in-time" data fetching approach means the protocol always uses the most current data for decision-making, without requiring continuous updates or maintenance.

Capital Efficiency

Osito achieves high capital efficiency through several key mechanisms:

  • No Rehypothecation: Collateral assets are never rehypothecated, allowing a high utilization target of 90% without increasing systemic risk.
  • Staking Mechanism: Token stakers improve capital efficiency by reducing dumpable supply without diluting borrow power.
  • All-Or-Nothing Liquidations: When a position becomes liquidatable, liquidators repay the full debt and receive all collateral.
Next: Token Qualification →