Introduction
Despite its robust infrastructure, Cosmos Hub still lacks a sustainable DeFi credit layer.
While Osmosis has succeeded as a DEX, Cosmos lacks a permissionless lending primitive that could anchor long-term liquidity and generate economic activity for the Hub.
PeerLend is a protocol design that proposes a simple, transparent, and oracle-free lending mechanism tailored to Cosmos.
A system where users set their own interest rates, loans accrue interest over time, and risky positions are resolved via an open “rescue market” — all without relying on price oracles.
PeerLend is not currently under development. This post is intended to share the idea openly and invite feedback from the Cosmos community.
How PeerLend Works
- Lending Offers with Custom Interest Rates
Lenders submit offers by specifying how much they’d like to lend and at what annual interest rate. Borrowers can browse offers and select the one that suits them.
Example:
Alex wants to lend 5,000 stATOM at 4% annual interest. Taylor chooses to borrow from Alex under those terms. Both the collateral and borrowed asset must be of the same token type. Cross-asset borrowing (e.g., ATOM → USDC) is not supported.
- 150% Minimum Collateral Requirement
To borrow funds, the borrower must deposit at least 150% collateral in the same token.
Example:
Taylor wants to borrow 5,000 stATOM and deposits 7,500 stATOM as collateral.
- Debt Grows Over Time (Health Factor System)
PeerLend does not use price oracles. Collateral value is treated as constant, and loan risk is determined by how much interest has accrued over time.
When the debt grows to 90% of the collateral, the loan becomes eligible for the rescue market.
Example:
Taylor borrows 5,000 stATOM at 10% annual interest. The debt grows to 6,750 stATOM, which is 90% of the 7,500 stATOM collateral. The loan is flagged for rescue.
- Rescue Market – Public Debt Repayment with Rewards
Any user can repay the open debt and receive a reward. The borrower keeps the remainder of their collateral. The protocol takes a small cut from the reward.
Example:
Jordan repays Taylor’s 6,750 stATOM debt. A 1% reward applies → 67.5 stATOM. Total payout = 6,817.5 stATOM. Protocol takes a 10% fee → 6.75 stATOM. Jordan receives 61.75 stATOM. Taylor gets back the remaining collateral.
Optional Feature: Voluntary Rescue Activation
Borrowers may choose to manually open their loan to the rescue market at any time, even before it becomes risky based on the Health Factor.
Why this matters:
• Allows borrowers to exit their debt early, without waiting for automatic rescue conditions
• Opens up strategic options: e.g. if the borrower can’t repay and wants someone else to take over the debt and recover the collateral
• Keeps the system flexible and borrower-friendly
Example:
Taylor knows they won’t be able to repay the loan soon.
They trigger the “Open to Rescue” function manually.
Jordan sees this loan and repays it early, earning the reward while Taylor recovers the remaining collateral.
Protocol Revenue Model
- Match Fee: A small fee (e.g. 0.5%) is charged when a lender and borrower are matched.
- Rescue Market Cut: 10% of the rescue reward is routed to the protocol.
- Optional Interest Fee: A portion of interest paid to lenders (e.g. 2–5%) may be redirected to the protocol via governance.
- Revenue Flow: Fees can be redirected to the Cosmos Hub community pool if PeerLend operates as an ICS consumer chain.
Technical Design
- Oracle-Free: No price feeds; loan risk is time-based via interest accrual.
- Permissionless: Anyone can lend, borrow, or rescue open debt positions.
- ICS-Compatible: Can operate as a Cosmos Hub-secured consumer chain.
- ICQ Integration: Collateral on other chains can be tracked using ICQ.
- Same-Asset Model: Loans and collateral must be of the same token.
- Governance-Friendly: Parameters like reward %, thresholds, and fees are adjustable by governance.
Why It Fits Cosmos
- Cosmos lacks a natively oracle-free lending protocol.
- Liquid staking assets (stATOM, qATOM) are widely available and growing.
- Cosmos Hub needs more protocols to generate activity and long-term value.
- ICS and ICQ provide the security and cross-chain functionality needed.
- The open governance culture is ideal for refining a transparent, community-aligned protocol.
Final Notes
PeerLend is not currently being built. This design is shared freely with the Cosmos community. It may be implemented, adapted, or improved by anyone interested.
All feedback, questions, and discussion are welcome.