Tectonic

What is Tectonic?

Tectonic is a decentralized non-custodial algorithmic-based money market protocol that allows users to participate as liquidity suppliers or borrowers. Suppliers provide liquidity to the market to earn a passive income, while borrowers are able to borrow liquidity in an over-collateralized fashion.

Tectonic's protocol design and architecture references Compound, a proven and audited protocol. It is complemented with an attractive incentive program powered by $TONIC, the native token of Tectonic protocol.

In summary, Tectonic protocol aims to provide secure & seamless cryptocurrencies money market functionalities, enabling multiple use cases for its users.

• “HODLers” can generate additional returns from interest by supplying assets to the protocol without having to actively manage their assets

• Traders can borrow certain cryptocurrencies to capitalize on their short-term trading view (e.g., shorting) or yield maximizing opportunities (e.g., farming)

• Users can obtain access to other cryptocurrencies for multiple purposes (e.g., participate in ICO, bonding), without having to liquidate their original assets

Supplying Assets to Tectonic

Tectonic enables users to supply their cryptocurrencies (assets) onto the platform as a liquidity provider. Tectonic protocol aggregates the supply from each user into a pool of assets controlled by smart contracts, making it a fungible resource for the protocol, while allowing users to withdraw their supply at any time.

In return for their supplied assets, liquidity providers will receive corresponding tToken (e.g., tETH, tUSDC), which entitles them to redeem the supplied assets in the future. The value of tToken will continuously increase reflecting the deposit interest rates, which is set as a function of the supply & demand of the assets.

Borrowing Assets from Tectonic

Using their supplied assets as collateral, users can borrow supported cryptocurrencies from Tectonic’s asset pools to be used for any purpose.

Each asset carries a Collateral Factor (i.e., Loan-to-Collateral ratio), which signifies the amount available to be borrowed for each collateralized asset A Collateral Factor of 75% means that the users can only borrow up to 75% of the value of their collateralized assets.

Should the value of the collateralized assets drop, or the value of the borrowed assets increase, a portion of the outstanding borrowing will be liquidated at the current market price minus some liquidation discount. The proportion of the borrowing assets to be liquidated varies depending on assets and market conditions. Users can prevent the liquidation event from happening, either by increasing the amount of collateral (i.e., supplying more assets) or by repaying some portion of their loan. Each loan will carry a compounded interest rate and can be repaid at any time.

The Collateral Factor for each asset is set based on several inherent characteristics of the asset, such as availability in the reserve and asset’s liquidity in the market. These ratios and their parameters are currently determined by the Tectonic team, however as the protocol matures and the necessary processes are in place, the governance of these parameters will be opened to the community via Tectonic’s governance process.