Participants & Glossary

Participants

Borrower: The party receiving the loan by using BTC as Collateral

Liquidity Provider: Users supplying the loan through the Lending Contract

Lending Contract: A smart contract deployed on the Side Chain that automates the operations of the lending pool. This contract enables liquidity providers to supply assets for lending and earn rewards in return. While the Lending Contract itself does not have the capability to sign transactions, it delegates this function to the Distributed Collateral Agent (DCA), which signs transactions on behalf of the contract and in collaboration with the borrower.

DCA (Distributed Collateral Agent): A distributed network of operators organized into a threshold adapter signature scheme. DCA operators sign Bitcoin 2-of-2 multi-sig transactions on behalf of the Lending Contract (with the counterpary being the Borrower). The DCA also manages Liquidated Assets in the event of a liquidation.

Oracle Operators: Monitor the price of BTC from cryptographically signed upstream sources, signing attestations at predetermined intervals. To maintain system integrity, Side Finance implements a mechanism that discards prices falling outside a pre-established variance level. This approach ensures that in the case of problems with a specific oracle, the safety of the system is maintained. Side Finance utilizes multiple independent cryptographically signed price sources to provide outcome attestations for its DLCs.

Glossary

Collateral Vault: A Bitcoin Taproot address. Borrowers send their BTC to a specified vault as collateral for lending. Each loan has its own unique vault address for its collateral

Repayment Escrow: An escrow vault where the borrower locks their loan repayment on the Side Chain

Collateral: The BTC assets pledged by the Borrower to borrow the loan

Principal: The original amount of assets borrowed

Maturity Time: The deadline by which the Borrower must repay the loan in full. If the Borrower fails to repay by this date, the DCA may liquidate the Collateral to recover the outstanding debt

Liquidated Assets: Collateral liquidated and sent to the DCA due to the borrower's failure to fulfill payments on the principal and interest of the loan before Maturity Time

Loan Default: The failure to repay a loan by the Maturity Time, which can result in the liquidation of Collateral

Liquidation Price: The BTC price at which a loan becomes undercollateralized, triggering the execution of CETs

Final Timeout: The specified Bitcoin blockchain height after which the Borrower is entitled to reclaim the collateral if the DCA or Side Chain becomes unresponsive.