Overview
Zeru is a decentralized finance (DeFi) platform designed to simplify the borrowing and lending process, enabling users to take Zero-Collateral Loans (ZCLs). Zeru offers a distinct set of features, including a credit-based system called ZScore and a Protocol Controlled Value Reserve (PCVR) to protect the ecosystem against loan defaults. It provides users with leverage and integrated strategies, such as Bull’N’Bear for asset trading and Liquidity Provision (LP) for Uniswap v3 participation, making it an inclusive platform for various DeFi applications.
Protocol Components
ZScore
ZScore is a credit score system integrated into Zeru, assigned to each user as a SoulBound Token (SBT). This score, ranging from 0 to 1000, reflects the user’s creditworthiness based on their interactions and contributions within the Zeru ecosystem. It incentivizes responsible behavior by rewarding activities like timely loan repayments and increased lending, while penalizing defaults. A higher ZScore boosts borrowing capacity and influences the minting rate for Credit Tokens (CTs), increasing ZCL eligibility.
Protocol Controlled Value Reserve (PCVR)
The PCVR acts as Zeru’s insurance fund, accumulating a reserve through small protocol fees from user activities. This reserve covers potential defaults, ensuring protocol stability. Users’ contributions to PCVR are represented by CTs, which are non-transferable SBTs tied to ZScore. Increased CTs allow users to secure higher ZCLs and enhance borrowing power.
Credit Tokens (CTs)
Credit Tokens, earned through user contributions to PCVR, represent the value a user has added to Zeru’s ecosystem. CTs support the virtuous cycle of the ZScore and borrowing capacity, enabling users to participate in DeFi strategies without collateral. They can also participate in Zeru’s leaderboard to access profit-sharing pools based on weekly engagement metrics.
DeFi Strategies
Bull’N’Bear Strategy
The Bull’N’Bear strategy allows users to take leveraged positions on supported assets, automating the process of trading by borrowing and swapping between stable assets like DAI and volatile assets like ETH. Users can initiate long or short positions, using up to 15x leverage, and profit from market movements. The protocol’s low borrow rates make it competitive against traditional exchanges.
How to Use Bull’N’Bear
- Users select an asset on the market page, specify collateral, and choose leverage and position type (long or short).
- After confirming transaction details, they open the position, which is managed by Zeru’s automated protocol.
- Positions can be updated by adding or adjusting collateral, with the platform’s Health Factor indicator showing the risk of liquidation.
Liquidity Provision (LP) Strategy
The LP strategy automates participation in Uniswap v3 by opening leveraged liquidity positions. Zeru’s AI optimizes liquidity deployment within a selected price range, aiming to enhance yield. Users earn returns based on leveraged LP positions, with added benefits of increased CTs and ZScore growth.
How to Use LP Strategy
- Users select a Uniswap v3 pool, enter the collateral, and choose the desired leverage.
- Once the position is opened, users can add or remove collateral to manage their positions.
- Closing the position returns the profits to the user and repays any outstanding ZCLs.
Zero-Collateral Loans (ZCLs)
ZCLs enable borrowing without providing initial capital, based on the user’s ZScore and CTs. Eligible users access various assets and participate in DeFi strategies. Repayment impacts their ZScore and CT balance, and defaulting lowers credit standing and forfeits some or all CTs.
Profit-Sharing Leaderboard
The protocol includes a leaderboard rewarding users with a share of protocol profits based on weekly engagement. Top contributors, based on ZScore-raising activities, are ranked weekly, with a claim window for rewards. Activity is defined by ZScore improvements and engagement in Zeru’s ecosystem.
Risk Management and Health Factor
Zeru employs a Health Factor system to measure the security of user positions. A Health Factor near 1 indicates increased liquidation risk, prompting users to add collateral or repay loans. This metric supports users in maintaining secure positions within the platform.
Future Prospects
Zeru envisions becoming a foundational DeFi layer, offering ZScore as a credit-score-as-a-service for other protocols. It also plans to integrate new strategies like EigenLayer restaking, expanding options for users to grow returns within the ecosystem.
