MYSO v1 Core: A Trust-Minimized Protocol for Zero-Liquidation Loans

MYSO v1 is a trust-minimized DeFi protocol implemented for the EVM that enables crypto-collateralized loans without liquidations, so called ZLLs. The protocol allows borrowers to take out ZLLs through non-custodial liquidity pools, which on the other side LPs can fund. Liquidity pools can be created by anyone using MYSO's open source v1 core smart contracts. Each pool is defined by (i) an asset pair, (ii) a maximum loan amount per pledged collateral unit, (iii) a loan tenor and (iv) an interest rate model. After a pool has been created and funded, borrowers can take out ZLLs by pledging into the liquidity pool an amount of collateral token (e.g. wETH) and borrowing an amount of loan token against it (e.g. USDC). Borrowers then have an option (but no obligation) to reclaim their previously pledged collateral if they pay a fixed repayment amount, which is determined autonomously by the pool contract and predominantly depends on current liquidity supply and demand. If a borrower doesn't repay before the ZLL expires, they forfeit their ability to reclaim their collateral, thereby making it available to LPs for claiming. By design, MYSO v1 doesn't involve any liquidations but instead allows LPs to earn yield for bearing the risk that a loan may become undercollateralized and not be repaid. The associated risk-reward profile resembles that of an in-the-money covered call position, which is a well-known conservative yield enhancement strategy.