Token Eligibility Requirements

For a token to be eligible as collateral in Osito Protocol, it must meet specific objective criteria that are verified on-chain. These requirements enable Osito's mathematical model to work effectively.

Core Design Principle

Osito's approach is to calculate lending limits based on worst-case scenarios rather than token value. The eligibility criteria don't attempt to filter for "quality" tokens - they establish the conditions necessary for the mathematical model to function correctly.

Core Eligibility Criteria

Token eligibility is determined by the OsitoToken.sol contract, which verifies:

  1. Fixed Token Supply: The token must have a verifiably fixed supply
  2. Verifiably Burned LP: A portion of the token's liquidity pool must be permanently destroyed

Why These Requirements Matter

1. Fixed Supply Requirement

The fixed supply requirement ensures:

  • The total token supply is known and cannot be manipulated
  • The protocol can accurately calculate dumpable tokens
  • The borrow limit calculation can function correctly

This requirement doesn't make a token "good" - it simply makes the supply predictable for calculations.

2. Burned LP Requirement

The burned LP requirement is important because:

  • It forces users to swap tokens for BERA rather than directly withdrawing liquidity
  • Creates a permanent liquidity commitment that can't be reversed
  • Establishes a baseline for calculating the worst-case scenario

Key Insight: Without burned LP, a user could withdraw liquidity directly, bypassing the price impact that the borrow limit calculation accounts for.

Verification Process

1. Fixed Supply Verification

Tokens must be deployed by either:

  • Panda Factory - A whitelisted token deployer on Berachain
  • Ramen - A whitelisted token deployer on Berachain

These deployers implement fixed supply constraints that ensure:

  • No additional tokens can be minted after creation
  • Token supply cannot be manipulated through inflation
  • The protocol can rely on supply figures for calculations

2. Liquidity Pool Verification

The token must have liquidity in a pair with wBERA on Kodiak, with a portion of the LP tokens permanently burned. The protocol verifies:

  • The existence of a valid liquidity pool on Kodiak
  • A minimum threshold of burned LP tokens (sent to dead address)
  • Sufficient liquidity depth for borrow limit calculations
// From OsitoToken.sol
function isEligibleToken(address token) external view override returns (bool) {
    // 1. Check if the token deployer is whitelisted 
    if (!isWhitelistedDeployer(token)) {
        return false;
    }
    
    // 2. Check if there is a valid pair with wBERA
    address pair = getTokenWberaPair(token);
    if (pair == address(0)) {
        return false;
    }
    
    // 3. Check if LP tokens have been burned (verifying liquidity commitment)
    uint256 burnedLP = IERC20(pair).balanceOf(BURN_ADDRESS);
    if (burnedLP < MINIMUM_BURNED_LP) {
        return false;
    }
    
    return true;
}

Scenarios These Requirements Prevent

The eligibility requirements specifically defend against this scenario:

  1. User creates a token
  2. User provides BERA liquidity to their token's pool
  3. User obtains a loan by depositing their tokens as collateral
  4. User tries to withdraw their liquidity directly (bypassing price impact)
  5. User extracts more BERA than they borrowed

By requiring burned LP, the protocol forces the extraction of BERA by swapping tokens (incurring price impact), which is exactly what the max_borrow formula accounts for.

Checking Token Eligibility

You can verify if a token is eligible through:

  1. Osito dApp: Tokens listed in the interface are automatically verified as eligible
  2. Contract Call: Call OsitoToken.isEligibleToken(tokenAddress) directly
  3. Token Explorer: Check the token's status on Osito's token explorer page

Benefits of Objective Eligibility

This objective approach to token eligibility offers several advantages:

  1. Permissionless Integration: Any token meeting the criteria can be used immediately
  2. Minimal Governance: No votes or subjective assessments needed
  3. Mathematical Approach: Security derives from calculations, not subjective trust

Making Your Token Eligible

If you're a token developer and want to make your token eligible for Osito Protocol:

  1. Deploy your token using Panda Factory or Ramen with a fixed supply
  2. Create a liquidity pool with wBERA on Kodiak
  3. Burn some LP tokens by sending them to the dead address: 0x000000000000000000000000000000000000dEaD

Once these steps are completed, your token will automatically be eligible for use in Osito Protocol, regardless of its utility, reputation, or market value.

← Back to Documentation