> For the complete documentation index, see [llms.txt](https://docs.basic.loans/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.basic.loans/english/protocol-methodology.md).

# Protocol Methodology

## Introduction <a href="#introduction" id="introduction"></a>

Basic is a lending and borrowing project based on smart contracts on IoTeX.

With IoTeX being DePIN-centric we noticed DeFi was underrepresented on IoTeX and believe that robust DeFi is necessary for DePIN to flourish as the space matures.

### Business Model <a href="#business-model" id="business-model"></a>

![](https://gblobscdn.gitbook.com/assets%2Ffilda-english-preview%2F-MZyeAg1-dQfFhTorPvq%2F-MZye_rO34V3kI7PDdPa%2F0.png?alt=media)

#### Basic Features <a href="#basic-features" id="basic-features"></a>

* Liquidity pool
* Interest rates are determined algorithmically by supply and demand
* Floating interest rates that are non-negotiable
* Absolutely transparent token balance information, complete records of all transactions and historical interest rates

#### Deposit <a href="#deposit" id="deposit"></a>

* Aggregate the tokens of each user
* Withdraw the assets at any time
* Collect the accrued interest at any time

#### Primary Use Cases <a href="#primary-use-cases" id="primary-use-cases"></a>

* Uses can supply their asset and earn interest at low risk
* dApps, institutions and exchanges can gain incremental returns

#### Borrowing Tokens <a href="#borrowing-tokens" id="borrowing-tokens"></a>

* Requires over-collateralisation
* No time limit for borrowing

#### Risk <a href="#risk" id="risk"></a>

* When the value of the borrowing assets is above the collateral ratio, the users' collateral should be liquidated at a price that is below the market price, which motivates the arbitrageurs to step in to eliminate the risk.

#### Primary User Cases <a href="#primary-user-cases" id="primary-user-cases"></a>

* Quickly borrow utility tokens at any time without having to wait (time required to fill an token buy order on exchanges)
* Users can conduct ICO investments by borrowing using their existing portfolio (multiple tokens or assets) as collateral.
* Short selling

#### Ledger System <a href="#ledger-system" id="ledger-system"></a>

Cash + Borrows = Supply + Equity

Follow international accounting standards:

| Event                    | Debit               | Credit              |
| ------------------------ | ------------------- | ------------------- |
| Supply Token             | Cash                | Supply              |
| Withdraw Token           | Supply              | Cash                |
| Borrow Token             | Borrows             | Cash                |
| Repay borrows            | Cash                | Borrows             |
| Liquidate (Borrower)     | Supply (Collateral) | Borrows(Asset)      |
| Liquidate ( Caller)      | Cash(Asset)         | Supply (Collateral) |
| Accrue Interest (Supply) | Equity              | Supply              |
| Accrue Interest (Loan)   | Borrows             | Equity              |

​[<br>](https://gregfilda.gitbook.io/filda-english-preview/v/chinese/)