⚙️Technical Documentation

In the rapidly evolving landscape of DeFi, Oasis stands as a pioneering platform, redefining the traditional paradigms of traditional DeFi lending markets. This stems from Oasis' unique combination of selectable assets available as collateral. As described in the previous synopsis, Oasis allows users to borrow against ERC-721, ERC-1155, and ERC-20 assets all within one lending platform.

Central to Oasis's operation is its adeptness in offering competitive loan to value (LTV) rates, reasonable interest rates on borrowing, and an easy to understand user interface.These features significantly minimize the risk of defaults and enhance the platform's reliability for a quality user experience. All and all, Oasis offers a competitive arena for users to generate yield on their assets via flexible and diverse capital allocation options. Also, integral to Oasis's ethos is a commitment to security and transparency, underscored by Hyacinth’s OxWeiss’s comprehensive audit performed on the platform to assure user safety and codebase quality which provides seamless use of platform functions. This audit was comprehensive via covering all elements of Oasis’s contracts. Altogether, this technical review of Oasis will highlight its cutting-edge architecture and unique functionalities that allow it to stand out against all lending competitors.

The specifics of loans are tied to the specific asset type being chosen as collateral. For example, ERC-721 and ERC-1155 NFT loans have different processes than token based ERC-20 type loans. ERC-20 type tokens are generally more liquid and can be easily traded between LP swaps while ERC-721 and ERC 1155 assets are generally less liquid and require auction based sales to transfer from buyers to sellers. Oasis keeps this in mind within how the protocol handles commerce within loans.

It is prudent to discuss why the loan to value (LTV) is crucial to DeFi lending. First of all, what is loan to value (LTV)? Loan to Value (LTV) simply put is the percentage limit to what users can borrow against a set amount of collateralized assets. For example, if a user wants to borrow against 10 Ether and the loan to value (LTV) is set to 50% the maximum acquirable loan would be 5 Ether.

The equation is shown below:

5 ETH Loan (Maximum Loan) = 10 ETH Collateral (Initial Collateral) * .50 (Loan to Value (LTV)) (as decimal 50% is .50)

The rationale for the limit to the inherent over-collateralized nature of DeFi loans is tied to the volatile nature of digital assets. Loans do not come without risks. These risks aren’t one sided either. These risks can affect both users and the protocol together. To mitigate the extent of this risk to all parties in mind, loans are generally limited to a maximum of .99 loan to value (LTV) industry wide. Violent price swings with highly leveraged positions can become in risk of default quite quickly without proper risk management mitigation. Note this is not the same type of loan as margin trading which comes with different simulational conditions that govern these types of asset strategies. An important note about Oasis is that loan to value (LTV) allowances differ between accepted collateral types which will be listed further in this analysis.

Although leverage does in fact trade risks to strategies, it does come with benefits. Leverage can allow strategies that would be otherwise not possible. For example, in proper use, leveraged positions on Oasis allows users to use strategies like looping. Users can borrow ShezUSD against other assets then borrow against lended out assets. This can create an optimal position for native yield generating assets like liquid restaked tokens or lower risk yield generating pairs such as stable pairs available on Curve Finance. Users can take advantage in both cases to collect large proportional allowances for their participation within such assets. There are endless possibilities for users to maximize return on their digital assets within Oasis though both mentioned and unique strategies.

As mentioned there is a unique maximum loan to value (LTV) to each supported asset within Oasis. This was selected by the team via a rigorous analysis of each asset's past and future performance prospects, inherent risks, and asset volatility. These factors all provide critical insight into what loan to value (LTV) cap is best for both users and the Oasis platform itself. NFT assets will have lower permissible loan to value (LTV) caps due to less liquidity in the case of an unhealthy loan therefore the protocol takes more inherent risk within the agreement. To protect the protocol for the sake of longevity, they reward lower permitted borrowing rates.

The following are loan to value (LTV) caps on Oasis from lowest to highest:

Shezmu Pharaoh NFTs: 50% LTV

Pudgy Penguin NFTs: 50% LTV

BAYC NFTs: 60% LTV

PT-rsETH: 60% LTV

PT-rswETH: 60% LTV

PT-uniETH: 60% LTV

sUSDe: 70% LTV

weETH: 70% LTV

wstETH: 70% LTV

sfrxETH: 75% LTV

USDC: 90% LTV

When acquiring liquidity for loans, users have the ability to borrow with two asset choices. The first of which is ShezUSD, our stablecoin. Most assets within Oasis permit this as a choice of liqudiity. The second asset is known as ShezETH, our ETH derivate that maintains a peg to spot ETH. This provides the benefit of removing the unsystematic risk found within ShezUSD positions. Instead, within loans of over ETH pegged derivates, users may only face risk of liquidation in the case such an asset depegs which is quite rare. Both assets are backed by collaterals and made liquid within Curve pools, which users may also participate in to earn yield.

These are supported liquidity types of each asset vault:

Shezmu Pharaoh NFTs: ShezUSD

BAYC NFTs: ShezUSD

Pudgy Penguin NFTs: ShezUSD

PT-rsETH: ShezETH & ShezUSD

PT-rswETH: ShezETH & ShezUSD

PT-uniETH: ShezETH

sfrxETH: ShezETH

sUSDe: ShezUSD

weETH: ShezETH & ShezUSD

wstETH: ShezETH & ShezUSD

USDC: ShezUSD

When it comes to situations where loans become unhealthy, this means permitted loan to value (LTV) thresholds have been surpassed. This means the percentage the loan consists of the total value of the interaction is in an unfavorable condition. For example, a user takes the previously described 50% loan to value (LTV) with 60% liquidation threshold loan on 10 ETH via accepting 5 ETH with ShezUSD. If Eth drops from $3000 to $2700, the price has dropped 10%. Following this, the initial collateral also drops in value as well by 10%.

This is represented below:

-10% ETH Price Change = ($27,000 Value ($2700/ETH*10) - $30,000 ($3000/ETH*10)) / $30,000 ($3000/ETH*10)

The issue that arises is that the new value of collateral is no longer sufficient for 50% loan to value (LTV). The loan is still with the value of 5 ETH of ShezUSD at initial $3000 price.

$15,000 Value of ShezUSD Loan = $3000/ETH * 5 ETH

If you compare this to new value of collateral the problem becomes apparent:

$15,000 (Value of Loan) / $27,000 (New Value of Collateral) = 55.55% Loan to Value (LTV)

To discover liquidation price, use the following formula:

(Value of loan / Liquidation Threshold Percentage) / Quantity of Collateralized Assets

Example:

$2500 Liquidation Price = ($15,000 (Value of Loan) / .60 (Liquidation Threshold Percentage) ) / 10 ETH (Quantity of Collateralized Assets)

To discover asset price change at liquidation from initial asset price when loan accrued:

(Liquidation Price - Initial Price at Time of Loan) / Initial price at Time of Loan

-20% ETH Price Change = ($2500 (Liquidation Price) - $3000 (Initial Price at Time of Loan)) / $3000 (Initial Price at Time of Loan)

As price fluctuations of 10% are not uncommon within DeFi, Oasis permits a 10% margin of error on top of maximum loan to value threshold before liquidation becomes a concern for all except USDC loans which its 5%. By liquidation it is meant when Oasis closes the position altogether due to insufficient collateral for a loan. This process depends on which asset is being lent against. NFT ERC 20 and ERC 1155 assets will be liquidated via an auction. This process is done automatically and once the NFT asset sells funds will be collected by protocol to recover lost funds with the help of the Stability Pool. The fund’s liquidity is borrowed to ease the collateral hole until the auction occurs. The funds are returned to the Stability Pool once the auctioned collateral is traded for ETH then swapped back into ShezUSD.

These are the liquidation thresholds for ShezUSD positions of currently supported Oasis assets:

Pudgy 60%

Shezmu Pharaoh NFTs: 70%

BAYC: 70%

PT-rsETH: 70%

PT-rswETH: 70%

PT-uniETH: 70%***

sUSDe: 80%

weETH: 80%

wstETH: 80%

sfrxETH: 80%***

USDC: 95%

"***" Signifies said assets may only be borrowed against with ShezETH as liquidity.

When it comes to ERC-20 assets liquidations occur via two vectors. The first of which is the use of the ShezUSD Stability Pool’s liquidity. This can be used to swap and sell an equivalent position of the token on the market to recover funds for the protocol. Once the swap occurs, the liquidity is transferred back and swapped back to ShezUSD to rebalance the Stability Pool and Curve Pool. The other method is via the use of flash loans. This allows for a similar strategy of liquidating the trade via using the liquidity to help sell unhealthy collateral to revindicate funds then the flashed funds are immediately returned to the lender.

All and all, we will continue to add more supported assets to Oasis as the protocol grows and new market trends arise. The main metric to guide analysis of Oasis’s growth is via analyzing changes in total value locked (TVL). This denominates funds allocated within Oasis and correlates to changes in community interest for the protocol. Metrics like total value locked (TVL) and fee generation of Oasis are available on either our website or our Dune Analytics page.

Follow @ShezmuTech on X for further updates regarding Oasis!