Pilot Over-lending Protocol Whitepaper
Pilot is a first over-lending protocol build by Pilot Lab based on Heco Chain, users can participate in liquidity farming with leverage through over-lending, enhance to get more revenue in a certain time unit.
Pilot Lab is an ecology system, which is focused on developing DeFi products, currently it is created basing on Huobi ECO Chain (Heco). PTD is the original project token, which can be shared with all the products from Pilot Lab.
The whitepaper explains the ecology application scenarios and the protocol architecture behind Pilot over-lending protocol built on Huobi Eco Chain (Heco).
IMPORTANT: YOU MUST READ THE FOLLOWING DISCLAIMER AND THE SECTION ENTITLED “IMPORTANT INFORMATION” IN FULL BEFORE CONTINUING
The distribution (the “Token Distribution”)of the “Pilot Lab Tokens” or “PTD” (the “Tokens”), to be used by users (“Users”) on Pilot Protocol (“Project”)and other participants of the Project to be developed by Pilot Lab, as detailed in this whitepaper (“Whitepaper”) is only intended for, made to or directed at, persons who are not Excluded Persons (as defined herein), and may be acted upon only by such persons. Moreover, this Whitepaper is not, is not intended to be and should not be construed to be, a prospectus or offer document of any sort and is not intended to and should not be construed to constitute an offer of shares or securities of any form, units in a business trust, units in a collective investment scheme or any other form of invest mentor regulated product, or a solicitation for any form of investment or regulated product in any jurisdiction. No regulatory authority has examined or approved of any of the information set out in this Whitepaper. This Whitepaper has not been registered with any regulatory authority in any jurisdiction. The focus of this Whitepaper is on the Project and the Pilot Token Distribution. You may have received, been in possession of or perused this Whitepaper, which contains additional important (related) information about the Pilot Protocol project (or, the “Project”), including the Project, the Tokens and their respective functions. This Whitepaper and such other documents as may be published by the Project team in relation to the Project, each as may be amended, modified, or supplemented from time to time (hereinafter collectively referred to as the “Project Documents”) are intended to be read in conjunction with one another for the purpose of any proposed purchase or use of Tokens.
For the avoidance of doubt, all Project Documents are subject to all disclaimers, restrictions, notices, and legal provisions contained in this Whitepaper. By accessing and/or accepting possession of any information in this Whitepaper or such part thereof (as the case may be), you represent and warrant to the token vendor of the Token Distribution (the “Token Vendor”) that:
- 1.you are not an Excluded Person;
- 2.you have read the entirety of this Whitepaper and understand the risks entailed in your purchase of Tokens;
- 3.you agree to be bound by the limitations and restrictions described herein; and you acknowledge that this Whitepaper has been prepared for delivery to you so as to assist you in making a decision as to whether to purchase Tokens.
Pilot is a decentralized pool-based lending protocol based on the Huobi ECO Chain (Heco) (based on the smart protocol for over lending on the Heco chain). By providing (depositing) supported assets to the agreement, users can earn interest on their digital assets (assets). We call these users lenders. The assets deposited by the lender will be transferred to a smart contract, which aggregates the total liquidity of each asset into a pooled fund for borrowers to borrow. Loans are not individually matched between lenders and borrowers, but are drawn from collective funds (fund pools). The money lender receives interest (interest income) from the interest paid by the borrower and distributes it in proportion to the liquidity it provides. Once lenders supply assets into the protocol, these assets act as collateral, enabling lenders to also borrow any asset up to a certain limit. This means that any borrower has to first supply assets into the protocol as collateral before taking out any loan.
The Pilot over-lending protocol creatively released the Heco-based over-lending Smart Contract, which creates value for every user with leverage while ensuring absolute fairness. Most of the project’s tokens are intended to distribute to users in the form of governance tokens and retained a small part is used as a risk reserve.
For example, Alice deposits one of the supported assets (such as HT) into the protocol for the first time. Once the funds are deposited, the deposited HT will be added to the synthetic asset, and the project will give 1 pHT as a deposit voucher. pHT is the synthetic asset. Since pHT will be affected by the volatility of the price of HT itself, the final obtained interest is not fixed. Assuming that the user will eventually get 0.1pHT interest, the project will eventually exchange 1.1HT to the lending user.
The pTokens obtained by Alice, such as pHT, represent her share of HT in the total circulation of HT. pToken is a tokenized representation of a user's loan position and is an interest-bearing method Heco token.
Before a user can borrow, they have to first deposit some of their assets that can be used as collateral on the protocol. Upon depositing such assets, the user receives pTokens, representing the user’s shares in the assets’ pools
For example, Alice can deposit HUSD, one of the available collateral assets, into the protocol and receives a balance of pHUSD that represents her share in the total HUSD pool. Alice can then use this pHUSD as collateral, enabling her to borrow other assets such as ETH. In this case, Alice is earning deposit interest on HUSD and paying borrow interest on ETH. More details on interest rates can be found in section v. Interest Rate Dynamics.
Each asset that can be used as collateral has an assigned Asset Maximum Loan-to-value (LTV). For instance, if Alice deposits $100 worth of HUSD, which has an Asset Maximum LTV of 75%, then Alice can borrow any asset with the Borrow Limit of $75. Borrow Limit is calculated based on the total value of deposited assets that can be used as collateral and Asset Maximum LTV of each deposited asset. Specifically, the Borrow Limit for an asset can be calculated as follows:
Borrow Limit = (Deposit Value in USD of Asset1*Asset Maximum LTV1 + Deposit Value in USD for Asset2*Asset Maximum LTV2 + ...)
A user can only borrow if the Account Health remains healthy after taking into account the new borrow amount. Account Health can be calculated as follows:
Account Health = Healthy (borrow value ≤Borrow Limit)
Account Health = Unhealthy (borrow value > Borrow Limit)
When a user borrows and receives the borrowed amount, the protocol calculates how many Borrow Shares the borrowed amount equals to. Borrow Shares represent the share of the user’s borrowed amount to the Total Borrows of that asset. Borrow Shares is calculated as follows:
Borrow Shares = (Borrow Amount * Total Borrow Shares) / Total Borrows
The number of Total Borrow Shares is set based on the first user who borrows this asset. For example, if Bob is the first user who borrows 1,000 HT, then the number of Total Borrow Shares starts with 1,000. If Alice then borrows 100 HT when the Total Borrows is 1,000 HT, then Alice gets 100 Borrow Shares (100 * 1,000 / 1,000)
How the Borrower Uses Leverage to Farm?
Pilot provides up to 3X leverage. Originally, only 1 HT was involved in farming. Now with three times leverage, you can borrow 2 HTs, that is, 3 HTs are farming. The income is higher than that of one HT farming, but you have to pay A certain amount of interest. Take MDEX/USDT as an example. Under normal circumstances, the borrower can get 50% of the return, that is, the final gain (without interest) 1+0.5=1.5HT. If 3 times leverage is used in the Pilot, the borrower will eventually get 150% of the return. That is (without interest) 1+1.5=2.5HT.
Users can only withdraw funds if there is sufficient total available liquid funds and the health of the account remains healthy after the transaction (low risk rate).
To withdraw a part or all of the deposited amount, the protocol calculates Withdraw Shares from the withdraw amount inputted, burns pTokens equal to the number of Withdraw Shares, and transfers the withdraw amount to the users. Withdraw Shares is calculated as follows:
Withdraw Shares = Withdraw Amount * Total pToken / Total Liquidity
Because Total Liquidity increases over-time from accruing borrow interest, the same withdrawal amount will equal smaller Withdraw Shares over-time, and thus burns fewer pTokens to claim the same withdraw amount. If the user withdraws all of the deposited amount, the user will receive a withdraw amount that is more than the originally deposited amount from accruing deposit interest. More details on interest rates can be found in section v. Interest Rate Dynamics.
To repay a part or all of the borrowed amount, the protocol calculates Repay Shares from the repay amount inputted, transfers the repay amount to the pool, and reduces Borrow Shares by Repay Shares. Repay Shares is calculated as follows:
Repay Shares = Repay Amount * Total Borrow Shares / Total Borrows
Because Total Borrows increases over-time from accruing borrow interest, the same repay amount will equal smaller Repay Shares over-time, reducing Borrow Shares by a smaller Repay Shares. If the user repays all of the borrowed amount, the user will pay more than the original amount because of accrued borrow interest. More details on interest rate can be found in section v. Interest Rate Dynamics.
Interest rates for borrowers and lenders are determined by Utilization Rate. Utilization Rate is calculated as follows:
Utilization Rate = Total Borrows / Total Liquidity
Because the Utilization Rate reflects the demand to borrow an asset, a higher Utilization Rate corresponds to a higher cost of borrowing or borrow interest rate. Each asset has its own base borrow rate and Optimal Utilization Rate, or the specific Utilization Rate that marks the beginning of a sharp rise in Borrow Interest Rate to protect the liquidity in the pool. Therefore, Borrow Interest Rate1and Borrow Interest Rate2when Utilization Rate is below and above Optimal Utilization Rate can be calculated as:
Borrow Interest Rate 1： when Utilization Rate < Optimal Utilization Rate:
Borrow Interest Rate = Base Borrow Rate + (Utilization Rate * Slope1)
Borrow Interest Rate 2： when Utilization Rate > Optimal Utilization Rate:
Borrow Interest Rate = Slope1+ [(Utilization Rate -Optimal Utilization Rate)/(100% -Optimal Utilization Rate) * Slope2]
5-10% of the Borrow Interest Rate will be allocated for Pool Reserve as an insurance for the pool. Since the accumulated borrow interestare added to Total Liquidity and the pTokens that lenders receive can claim the share of Total Liquidity, the higher borrow interest rate corresponds to the higher Deposit Interest Rate, which can be calculated as:
Deposit Interest Rate = Borrow Interest Rate * Utilization Rate
Causes of liquidation
A borrower bears the risk of having an unhealthy Account Health when the user’s total value of borrowed assets exceeds the Borrow Limit. Volatility in collateral assets and borrowed assets can cause Account Health to be unhealthy.
For instance, Alice deposits $100 worth of HUSD, which for instance has an Asset Maximum LTV of 75%, enabling Alice to borrow any asset up to the Borrow Limit of $75, and borrows $75 of ETH (e.g. 0.18 ETH) when ETH price is $400. If ETH price increases afterwards, Alice’s total value of borrowed assets increases since 0.18 ETH now equals to more than $75, resulting in her total value of borrowed assets being higher than her Borrow Limit. On the other hand, Account Health can become unhealthy when the price of the collateral asset, or in this case HUSD, decreases such that Borrow Limit becomes less than the total value of borrowed assets.
Due to the volatile nature of asset prices, users are recommended to borrow at a value less than the Borrow Limit to avoid liquidation.
When Account Health becomes unhealthy, any external actor called a liquidator can repay up to the Close Factor of the user’s borrowed amount. This Close Factor is the portion of the borrowed asset that can be repaid by a liquidator in one transaction. The liquidation process may continue until the user’s Account Health becomes healthy, or when the total value of borrowed assets is below Borrow Limit. The Close Factor ensures that the user’s account will not be fully liquidated if not necessary.
When a liquidator repays the user’s borrowed amount, liquidator inputs Liquidate Shares and the protocol reduces the user’s Borrow Shares by Liquidate Shares
To reward the liquidator for liquidating an unhealthy account, the liquidator can purchase Collateral Amount, or the value of the user’s collateral asset equivalent to the liquidate value at a discounted price. The difference between Collateral Amount that the liquidator receives and the liquidate amount the liquidator pays is captured by Liquidation Bonus. Collateral Amount is calculated as follows:
Collateral Amount = (Liquidate Amount * Price of Liquidated Asset / Price of Collateral Asset) * (Liquidation Bonus)
Liquidate Amount is calculated as follows:
Liquidate Amount = (Liquidate Share * Total Borrows) / Total Borrow Shares
Lending Pool is the core contract of the protocol. This protocol manages all states and handles user interactions with the lending pool. Interactions include deposit, borrow, repay, withdraw and liquidate.
Lending Pool Configurator
Lending Pool Configurator provides configuration functions for Lending Pool and implements the configuration of Heco token pools. Configurations include pool configuration, and interest rates calculation.
pToken contract manages the minting and burning of pTokens. pToken represents a user’s lending position or the share of deposited amount to Total Liquidity of that asset
The protocol uses MDEX oracle. Price Oracle contract is responsible for querying the latest price of an asset from MDEX.
PTD will act as the core utility token across a portfolio of Pilot products, including staking, reward sharing through providing liquidity to or securing the protocol, as well as governance procedures. For PTD Lending particularly, there will be a liquidity mining program rewarding users with PTD for bootstrapping liquidity on the protocol by depositing and borrowing assets.
As Pilot Lab continues to innovate in the DeFi space and build more Pilot products, PTD token holders will be able to propose and decide upon key protocol parameters to all Pilot products and how the products interoperate. PTD tokens will continue to be the primary tool to align incentives of community builders and supporters, creating a strong community of DeFi enthusiasts who will collectively help propel Pilot ecosystem forward
Token Total Supply 100,000,000
Currently, four synthetic assets including pHT, pUSDT, pHBTC, and pETH are supported to participate in non-principal farming. In the first week, pHT and pUSDT produce 20,000 PTDs in a single day; in the first week, pHBTC and pETH produce 10,000 PTDs in a single day. Decrease output by 30% every week for a total of 12 weeks.
Prospective purchasers or holders of Pilot Tokens (“PTD”) (“Purchasers”, “Holders”, or “You”) should carefully consider and evaluate all risks and uncertainties associated with PTD, the Pilot Project (“Project”), Pilot Lab and any of its related corporations (“Group Entities”) and their respective businesses and operations, any sale and purchase of PTD including the terms and conditions governing such sale (“T&Cs”), and all information set out in this white paper (“White Paper”) prior to any purchase of PTD. You should not purchase PTD unless you have understood and accepted all risks involved in the purchasing, holding and using of the PTD including the risks set out in this document. If any of such risks and uncertainties develops into actual events, the business, financial condition, results of operations and prospects of PTD and/or any or all of the Group Entities could be materially and adversely affected. No person owes you any returns in respect of the PTD or can guarantee that the Project, any PTD and any and all the activities and businesses contemplated and discussed in this White Paper will definitely be established, materialize and be carried out, or result in any returns now or in the future. In such cases, you may lose all or part of the value of the PTD which you and you alone will have to solely bear
For the avoidance of doubt, the risks involved with purchasing PTD include (but are not limited to) the following:
Risk of Uninsured Losses
Unlike bank accounts or accounts at some other financial institutions, PTD is uninsured unless you specifically obtain private insurance to insure them. Thus, in the event of loss or loss of utility value, there is no public insurer or private insurance arranged by any person to provide recourse (and in any event, no person is obliged to compensate or insure you for any event of loss or loss of utility value).
Risks Associated with Uncertain Regulations and Enforcement Actions
The regulatory status of PTD and distributed ledger technology is unclear or unsettled in many jurisdictions, but numerous regulatory authorities across jurisdictions have been outspoken about considering the implementation of regulatory regimes which govern cryptocurrency or cryptocurrency markets. It is difficult to predict how or whether regulatory agencies may apply existing regulation with respect to such technology and its applications, including the Project and PTD. It is likewise difficult to predict how or whether legislatures or regulatory agencies may implement changes to law and regulation affecting distributed ledger technology and its applications, including the Project and PTD. Regulatory actions could negatively impact the Project and PTD in various ways, including, for purposes of illustration only, through a determination that PTD is a regulated financial instrument that require registration or licensing, which may force the Project to be made unavailable in certain areas. Any Group Entity may cease operations in a jurisdiction in the event that regulatory actions, or changes to law or regulation, make it illegal or difficult to operate in such jurisdiction, or commercially undesirable to obtain the necessary regulatory approval(s) to operate in such jurisdiction.
Risks Arising from Taxation
The tax characterization of PTD is uncertain. You must seek your own tax advice in connection with purchasing, holding and utilizing PTD, which may result in adverse tax consequences to you, including, without limitation, withholding taxes, transfer taxes, value added taxes, income taxes and similar taxes, levies, duties or other charges and tax reporting requirements.
Risk of Alternative Competing Projects
It is possible that alternative projects could be established in an attempt to facilitate services similar to those provided by the Project. The Project may compete with these alternative projects, which could negatively impact the Project and PTD.
Risk of Insufficient Interest in the Project or Distributed Applications
It is possible that the Project will not be used by a large number of individuals, companies and other entities or that there will be limited or no public interest in the creation and development of distributed projects (such as the Project) more generally. Such lack of use or interest could negatively impact the development of the Project and therefore the potential utility of PTD.
Risks Associated with the Development and Maintenance of the Project
The Project is still under development and may undergo significant changes over time. Although it is intended for PTD and the Project to have the features described in this White Paper, and the relevant Group Entity will endeavor to work towards those ends (subject to internal business considerations), changes may be required to be made to the specifications of PTD or the Project for any number of reasons. This could create the risk that PTD or the Project, as further developed and maintained, may not meet your expectations or requirements at the time of purchase. Furthermore, despite the relevant Group Entity’s good faith efforts to develop and maintain the Project, it is still possible that the Project will experience malfunctions or otherwise fail to be adequately developed or maintained, which may negatively impact the Project and PTD.
Inadequate Disclosure of Information
As at the date hereof, the Project is still under development and its design concepts, consensus mechanisms, algorithms, codes, and other technical details and parameters may be constantly and frequently updated and changed. Any statement in the White Paper is subject to change and may be adjusted and updated from time to time.
Risk of an Unfavorable Fluctuation of Currency Value
The proceeds from selling PTD are intended to fund the development and maintenance of the Project. If the value of digital assets in which the PTD sale proceeds are denominated fluctuates unfavorably during or after the sale of PTD, the relevant Group Entity which will undertake development of the Project may not be able to fund development, or may not be able to develop and/or maintain the Project in the manner that it intended.
Risk Associated with Assets Liquidation
The risk of assets being liquidated due to market volatility or improper user operations.
Risks of Dissolution of any Group Entity or Project
Start-up companies such as any of the Group Entities involve a high degree of risk. Financial and operating risks confronting start-up companies are significant, and the Group Entities are not immune to these. Start-up companies often experience unexpected problems in the areas of product development, marketing, financing, and general management, among others, which frequently cannot be solved.
It is possible that, due to any number of reasons, including, but not limited to, an unfavorable fluctuation in the value of cryptographic and fiat currencies, decrease in the utility of PTD due to negative adoption of the Project, the failure of commercial relationships, or intellectual property ownership challenges, the Project may no longer be viable to be developed or even if developed, maintained and operated, and the Group Entities may be dissolved.
Risks Arising from Lack of Governance Rights
Because PTD confers no governance rights of any kind with respect to the Project or any Group Entity, all decisions involving the Project or any Group Entity will be made by the relevant Group Entity at its sole and absolute discretion, including, but not limited to, decisions to discontinue the Project, or to sell or liquidate any Group Entity. These decisions could adversely affect the Project and PTD you hold.
Risks Associated with Markets for PTD
There is no prior market for PTD and the PTD token sale may not result in an active or liquid market for PTD. PTD is designed to be used solely within the Project, hence there may be illiquidity risk with respect to the PTD you hold. PTD is not a currency issued by any central bank or national, supra-national or quasi-national organization, nor is it backed by any hard assets or other credit nor is it a "commodity" in the usual and traditional sense of that word. No Group Entity is responsible for, or obliged to pursue, the circulation and trading of PTD on any market. Trading of PTD will merely depend on the consensus on its value between the relevant market participants. No one is obliged to purchase any PTD from any holder of PTD, nor does anyone guarantee the liquidity or market price of PTD to any extent at any time. Furthermore, PTD may not be resold to a purchaser who faces restrictions in the purchase of cryptographic tokens or with respect to whom the purchase of PTD may be in violation of applicable laws. Accordingly, no Group Entity or any person makes any representation, warranty or guarantee that there will be any demand or market for PTD, or that the price you pay for PTD is indicative of any market valuation or market price for PTD.
Even if secondary trading of PTD is facilitated by third party exchanges, such exchanges may be relatively new and subject to little or no regulatory oversight, making them more susceptible to fraud or manipulation. Furthermore, to the extent that third parties do ascribe an external exchange value to PTD (e.g., as denominated in a digital or fiat currency), such value may be extremely volatile, decline below the price which you have paid for PTD, and/or diminish to zero.
Loss of Talent
The development of the Project depends on the continued co-operation of the existing technical and commercial team and expert consultants, who are highly knowledgeable and experienced in their respective sectors. The loss of any member may adversely affect the Project or its future development. Further, stability and cohesion within the team is critical to the overall development of the Project. There is the possibility that conflict within the team and/or departure of core personnel may occur, resulting in negative influence on the project in the future.
Failure to Develop
The Project is still in the developmental stage, hence there may be large changes to the final design before the official version is released. There is the risk that the development of the Project will not be executed or implemented as planned, or may not meet any expectation of purchasers of PTD, for a variety of reasons, including without limitation the event of a decline in the prices of any digital asset, virtual currency or PTD, unforeseen technical difficulties, and shortage of development funds for activities.
Risks Associated with the Related Blockchain
Because PTD and the Project are based on blockchain technology, any malfunction, breakdown or abandonment of the relevant blockchain may have a material adverse effect on the Project or PTD. Moreover, advances in cryptography, or technical advances such as the development of quantum computing, could present risks to PTD and the Project by rendering ineffective the cryptographic consensus mechanism that underpins the relevant Blockchain. The future of cryptography and security innovations are highly unpredictable.
Risk of Losing Access to PTD Due to Loss of Private Key(s)
A private key, or a combination of private keys, is necessary to control and dispose of PTD stored in your digital wallet, vault or other storage mechanism. Accordingly, loss of requisite private key(s) associated with your digital wallet, vault or other storage mechanism storing PTD may result in loss of such PTD. Moreover, any third party that gains access to such private key(s), including by gaining access to login credentials of a hosted wallet service you use, may be able to misappropriate your PTD. No Group Entity can or will be responsible for any such losses.
The PTD, being cryptographic tokens, are a new and untested technology. In addition to the aforementioned risks, there may be other risks associated with your purchase, holding and use of PTD, including those may not be anticipated by the Group Entities. Such risks may further materialize as unanticipated variations or combinations of the risks discussed above or otherwise howsoever arise.
Last modified 2yr ago