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On this page
  • What are Lines of Credit?
  • Why use TrueFi Lines of Credit?
  • How are interest rates determined?
  • Do lines of credit have a maturity date?
  • How does lending to a Line of Credit work?
  • How does borrowing from a TrueFi Line of Credit work?
  • How is interest accrued?
  • How are TrueFi Lines of Credit created?
  • What are the parameters for each Line of Credit?
  • What are the fees on Lines of Credit?
  • Is the Line of Credit code audited?
  • Can I demo Lines of Credit?
  • Where can I find contract addresses and technical details?

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  1. TrueFi Protocol

Lines of Credit

Automated lending pools governed by supply/demand curve

PreviousManaging KYC/KYB requirementsNextLine of Credit tutorial

Last updated 11 months ago

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For technical docs, see Lines of Credit technical details

What are Lines of Credit?

TrueFi Lines of Credit (also referred to as Automated Lines of Credit or "ALOCs”) are lending pools for a single borrower, where the interest rate paid by borrowers is determined by a configurable interest rate curve.

For a brief demo, see the video below:

Why use TrueFi Lines of Credit?

TrueFi Lines of Credit provide borrowers a flexible way to raise capital and lenders a way to deploy capital while maintaining high liquidity.

TrueFi Lines of Credit use supply and demand dynamics to set interest rates, giving lenders incentive to supply capital to pools above target utilization rates and borrowers incentive to maintain optimal liquidity ratios in each pool.

How are interest rates determined?

It’s generally (but not always) the case that as utilization increases, the interest rate increases (but not past a ceiling interest rate, chosen by the borrower) and as utilization decreases, the interest rate decreases (but not past a floor interest rate, chosen by the borrower)

From the borrower’s perspective: Borrower expresses that they are willing to borrow between [x]% and [y]%, with an ideal utilization rate of [90]% so that some amount of instant liquidity is available to lenders.

From the lender’s perspective: Lenders want to deploy capital to loan opportunities without losing the ability to withdraw funds when needed. In return, lenders earn a dynamic rate based on the pool utilization and interest rate curve configuration.

Do lines of credit have a maturity date?

Yes, each line of credit has a specified maturity date (endDate). All debt and interest is due by this maturity date. Once maturity has passed, borrowers cannot draw additional capital and lenders cannot lend additional funds to this line of credit.

How does lending to a Line of Credit work?

Lenders can withdraw from the pool’s idle funds at any time funds are available. As lenders enter or exit the pool, the utilization of the pool changes, and thus, the lender APY changes as the interest rate paid by the borrower changes.

How does borrowing from a TrueFi Line of Credit work?

How is interest accrued?

Interest owed by the borrower is accrued block-by-block. Similarly, lenders accrue interest each block as the pool value increases (pool value = principal + interest accrued).

Note that for borrowers, interest owed is calculated upon the principal borrowed (i.e. interest amount is not compounded, borrower does not “pay interest on interest”).

How are TrueFi Lines of Credit created?

Borrowers work with TrueFi DAO governance to create a line of credit. This should be done as a standard proposal to TrueFi DAO describing all the parameters involved in the proposal. It is a 2 step process.

  1. If vote passes, then the address requesting creation is allowlisted for line of credit creation. Borrower deploys Line of Credit with approved parameters.

What are the parameters for each Line of Credit?

  1. Borrowers define base parameters:

    • Underlying token: can denominate pool in any ERC20 (including but not limited to USDC, USDT, WETH, etc)

    • protocolFee (const) = 50 bps paid by lender at withdrawal

    • premiumFee [optional]: = set to 0 by default; can be configured by borrower

    • endDate: all loans must be repaid by end date

    • maxSize: principal in pool cannot exceed this amount

    • “Lender restrictions” (aka deposit strategy): pool can be permissioned, can use whitelist or signature to determine who can lend

    • Set Interest rate min/optimum/max

    • Set interest rate curve “kinks”

    • Note: TrueFi contributors are happy to consult with borrowers to help set these curves.

What are the fees on Lines of Credit?

Lines of Credit pay a protocol fee to the TrueFi DAO treasury. Fees are quoted on a per annum basis, accrue block-by-block, and are paid upon each smart contract interaction (lend/withdraw/disburse loan/repay loan).

The example below illustrates how the protocol fee works:

Protocol Fee example

Take an example line of credit Verum Fund, which holds 1,000,000 USDC worth of loans and assume protocol fee = 50 bps per annum (0.50%).

Assuming the value of Verum Fund grows linearly from 1,000,000 USDC to 1,100,000 USDC over the course of 30 days (avg. value of 1,050,000 USDC), the line of credit would pay a protocol fee of 431.51 USDC for this time period:

Protocol fee = 1,050,000 USDC * 0.50% * (30/365) = 431.51 USDC

Is the Line of Credit code audited?

Can I demo Lines of Credit?

Yes, see Line of Credit tutorial.

Where can I find contract addresses and technical details?

See Lines of Credit technical details.

Once a Line of Credit is created, lenders can put funds into the pool if they meet the lender restriction requirements that have been configured (lines of credit can be permissionless, or ).

Once a , borrowers can withdraw idle funds at any time before the pool's maturity (endDate). After maturity, deposit and borrow actions within the line of credit are disabled, and borrower must repay all principal and interest accrued.

Borrower requests Line of Credit approval by the TrueFi DAO and recommends parameters (see section below )

Configure Interest rate curve (similar to Aave/Compound/other protocols, borrowing rates are defined by a rate curve). For a worksheet example, see this .

For brief demo of configuration, please see this for video of Lines of Credit interest rate curve configuration:

For up-to-date fee rates on each vault, please see vault pages at .

Yes, see here:

⚡
permissioned pools
spreadsheet
https://twitter.com/TrueFiDAO/status/1511034505028583426
https://app.truefi.io/
https://github.com/g0-group/Audits/blob/master/TrueFiDec2022.pdf
line of credit has been created
What are the parameters for each Line of Credit?