Root Finance

1. Lending: Users can supply their assets to the Root Finance platform, becoming liquidity providers. The protocol aggregates these supplied assets into pools governed by smart contracts. Lenders earn passive income through interest generated from borrowers using these pools.
2. Borrowing: Users can borrow supported cryptocurrencies by leveraging their deposited assets as collateral. The protocol ensures that all loans are overcollateralized, meaning the value of the collateral must exceed the value of the borrowed assets.

1. Appreciation: The value of Root Receipts grows over time, reflecting the interest earned on the supplied assets.
2. Fungibility: Root Receipts are fungible tokens, meaning they can be transferred or potentially used in other DeFi protocols.
3. Interest Accrual: The appreciation of Root Receipts is determined by the interest rates on deposits, which are in turn influenced by the supply and demand dynamics of the assets within the protocol.

• When capital is plentiful (low utilization), interest rates are set low to encourage borrowing.
• When capital is scarce (high utilization), interest rates increase to incentivize repayments and additional deposits.

• Up to 40% of the loan value can be liquidated.
• Liquidators receive an incentive, which includes an 8% liquidation fee.
• The liquidation process aims to restore the loan to a healthy level of collateralization.

• Users' assets are secured within immutable smart contracts.
• There's no need for intermediaries or custodial control.
• The smart contracts are open-source and publicly available for review, adhering to the principle of "don't trust, verify."

• Dynamic adjustment based on the Utilization Rate (U) of the asset pool.
• A two-phase interest rate curve centered around an optimal utilization rate (Uoptimal).
• Gradual rate increase up to Uoptimal, followed by a significant increase beyond this point.
• Separate formulas for calculating borrow rates and deposit rates.

• Liquidations are triggered when an account's loan-to-value (LTV) ratio meets or exceeds the liquidation threshold.
• Up to 40% of the loan value can be liquidated in a single event.
• Liquidators receive an incentive, including an 8% liquidation fee.
• The process aims to restore loans to healthy collateralization levels.

This mechanism helps protect lenders and maintain the overall health of the protocol.

• They enable complex DeFi operations and arbitrage opportunities.
• The audit identified a critical vulnerability in the flash loan mechanism, which was subsequently fixed.
• The implementation details and current status of flash loans are not fully described in the provided documentation.

• The protocol has undergone rigorous audits by reputable third-party firms.
• Smart contracts are open-source and publicly available for community review.
• The team adheres to best practices in blockchain industry development.

• Users earn points for interacting with the platform, such as supplying or borrowing assets.
• Additional points can be earned through specific quests, like following Root Finance on social media.
• A referral program allows users to earn bonus points.
• Points are calculated based on the value of assets supplied or borrowed, with different rates for different assets.
• A leaderboard displays top wallets based on their Root Points.

1. Lending Market: The central contract managing lending and borrowing operations.
2. Single Resource Pool: Handles individual asset pools.
3. Internal Price Feed: Provides price data for assets within the system.

• lending_market.rs: Implements the main lending market functionalities.
• resources.rs: Defines the resources used in the system.
• modules/cdp_data.rs: Manages Collateralized Debt Position (CDP) data.
• modules/cdp_health_checker.rs: Checks the health of CDPs.
• modules/interest_strategy.rs: Implements the interest rate strategy.
• modules/liquidation_threshold.rs: Defines liquidation thresholds.
• modules/pool_config.rs: Configures individual asset pools.
• modules/pool_state.rs: Manages the state of asset pools.

1. Non-custodial Design: User assets are secured within immutable smart contracts, eliminating the need for trust in intermediaries.
2. Open Source Code: The smart contracts are entirely open-source and publicly available, allowing for community review and verification.
3. Third-party Audits: The protocol has undergone rigorous audits by reputable third-party firms to ensure the integrity and safety of the system.
4. Access Control: The system implements access control mechanisms to restrict certain functions to authorized users only.
5. Decimal Precision Handling: The system uses the Decimal type for financial calculations, though the audit report notes that there's room for improvement in standardizing decimal precision handling.

1. Critical: A vulnerability in the flashloan mechanism allowing unrestricted burning of TransientResData resources, which could be exploited to avoid repaying flashloans. This issue was fixed.
2. Medium:
• Lack of a liquidator badge revocation mechanism.
• Centralized price feed, introducing a single point of failure risk.
3. Low:
• Potential for creation of empty Collateralized Debt Positions (CDPs).
• Inconsistent handling of decimal precision in financial calculations.

1. Asset Selection: Users can supply various cryptocurrencies, including $WBTC, $ETH, $XRD, $USDC, $USDT, and $HUG.
2. Deposit: Users deposit their chosen assets into the Root Finance protocol.
3. Root Receipts: In return for their supplied assets, users receive Root Receipts (e.g., $rtxETH, $rtxUSDC). These receipts represent the user's right to redeem their supplied assets in the future.
4. Interest Accrual: The value of Root Receipts grows over time, reflecting the interest rates on deposits determined by the supply and demand dynamics of the assets.
5. Withdrawal: Users can withdraw their supplied assets at any time by redeeming their Root Receipts, subject to the available liquidity in the protocol.

1. Collateral: Users must first supply assets to use as collateral.
2. Loan-to-Value (LTV) Ratio: Each asset has a specific LTV ratio, which determines the maximum amount that can be borrowed against it. The overall borrowing capacity is calculated based on the average of the LTV ratios of the supplied assets, weighted by their respective values.
3. Borrowing: Users can borrow any of the supported cryptocurrencies up to their borrowing limit. Available assets for borrowing include $WBTC, $ETH, $XRD, $USDC, and $USDT.
4. Interest Accrual: The borrowed amount accrues interest over time, based on the protocol's dynamic interest rate model.
5. Risk Management: Users need to monitor the market value of their collateral and borrowed amount to maintain a healthy financial position and avoid liquidation.

1. Flexible Repayment: Users can choose to make partial or full repayments of their loans.
2. LTV Reduction: Repaying loans lowers the user's LTV ratio, which is crucial for avoiding liquidation.
3. Collateral Release: As users repay their loans and their LTV decreases, they can withdraw a portion of their collateral. Full repayment allows for complete collateral withdrawal.
4. Interest Savings: Prompt repayment helps users minimize interest accumulation, allowing for better debt management.

1. Triggering Conditions: Liquidations occur when an account's collateral value decreases or the borrowed amount increases relative to the collateral, causing the LTV ratio to meet or exceed the liquidation threshold.
2. Liquidation Threshold: This is set at 5% above the Maximum LTV for each asset. For example, if an asset's Max LTV is 70%, its Liquidation Threshold would be 75%.
3. Liquidation Process: When a position is flagged for liquidation, the protocol allows liquidation of up to 40% of the Loan Value.
4. Liquidator Incentive: Liquidators receive an incentive for performing the liquidation. This includes a liquidation fee of 8% of the liquidation value.
5. User Impact: For the user being liquidated, the liquidation results in a reduction of their debt, but also a loss of a portion of their collateral.
6. Health Bar: Root Finance provides a Health Bar feature to help users monitor their position's health and proximity to the liquidation threshold.

1. Asset Supply and Borrowing: For every $100 worth of assets supplied or borrowed, users automatically accumulate Root Points every 24 hours.
2. Quests: Users can complete specific tasks to earn additional points.
3. Referrals: Users can earn bonus points by referring new users to the platform.

1. Social Media Engagement:
• Follow Root Finance on X (formerly Twitter): +10 Root Points (one-time bonus)
• Join the Root Finance Telegram: +10 Root Points daily
2. Asset Deposit:
• Deposit at least $200 USD worth of assets: Earn Root Points daily based on the value deposited
3. Asset Borrowing:
• Borrow at least $100 USD worth of assets: Accumulate Root Points daily based on the value borrowed
4. Referral Program:
• Invite a friend to join Root Finance: Earn an additional 10% of the Root Points they accumulate every 24 hours

• Snapshots of users' positions are taken at random intervals throughout the 24-hour period.
• Assets must remain in place during the day to ensure eligibility for the points earned.
• If a user's balance changes or falls below the required threshold, their points for that day may be affected.

• Governance participation
• Access to exclusive features or products
• Discounts on protocol fees
• Potential token airdrops

1. Critical Vulnerability: A flaw in the flashloan mechanism was discovered that could allow unrestricted burning of TransientResData resources, potentially enabling users to avoid repaying flashloans. This issue was reported as fixed after the audit.
2. Access Control: The audit revealed a lack of a liquidator badge revocation mechanism. This could potentially lead to security issues if a liquidator's rights need to be revoked.
3. Empty CDP Creation: The potential for creating empty Collateralized Debt Positions (CDPs) was identified as a low-risk issue.
4. Decimal Precision: Inconsistent handling of decimal precision in financial calculations was noted, which could lead to small discrepancies that may accumulate over time.

1. Price Volatility: Rapid price fluctuations in cryptocurrencies can lead to sudden changes in collateral values, potentially triggering liquidations.
2. Liquidity Risk: In periods of high market stress, there might be insufficient liquidity for users to withdraw their assets or for liquidations to occur efficiently.
3. Interest Rate Fluctuations: The dynamic interest rate model used by Root Finance, while designed to balance supply and demand, could lead to rapid changes in borrowing costs or lending yields.

1. Centralized Price Feed: The audit report noted a centralized price feed as a medium-severity issue. This introduces a single point of failure risk, where inaccurate price data could potentially disrupt the entire system.
2. Radix DLT Dependence: As Root Finance is built on the Radix DLT, it is exposed to any potential issues or limitations of this underlying blockchain platform.
3. Liquidation Mechanism: While designed to maintain system solvency, the liquidation process could potentially lead to significant losses for users if not managed properly or if market conditions are extremely volatile.

1. Regulatory Uncertainty: The rapidly evolving nature of DeFi means that new regulations could potentially impact the operation of protocols like Root Finance.
2. Cross-border Transactions: As a decentralized platform, Root Finance may facilitate transactions across different jurisdictions, potentially raising complex legal and regulatory questions.
3. KYC/AML Compliance: The non-custodial and decentralized nature of the protocol may present challenges in complying with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations, which are increasingly being applied to cryptocurrency platforms.