Zest Protocol overview

Zest Protocol is a Bitcoin lending protocol. Zest operates on-chain and is open-source.
Zest enables Bitcoin liquidity providers to earn Bitcoin yield through professionally managed lending pools that lend to the most credit-worthy borrowers in crypto. For borrowers, Zest offers on-chain Bitcoin loans directly against their balance sheet.

Step by step walkthrough

  1. 1.
    Pool Delegate is onboarded by the DAO
  2. 2.
    Delegate creates profile and strategy
  3. 3.
    Delegate deploys and initiates Bitcoin pool
  4. 4.
    Liquidity Providers (LPs) review delegate profile and add Bitcoin liquidity
  5. 5.
    Borrower creates borrower profile and details loan terms
  6. 6.
    Delegate views borrower requests and conducts private diligence on terms directly with borrower
  7. 7.
    Once terms are agreed, borrower launches loan contract
  8. 8.
    Delegate funds the loan contract with Bitcoin from the pool
  9. 9.
    Borrower draws down the Bitcoin loan and stakes collateral in one transaction. An establishment fee is taken from drawdown and sent to the Zest Treasury
  10. 10.
    Borrower pays Bitcoin rewards according to the scheduled repayment cycle and pays Bitcoin principal with final repayment upon maturity
  11. 11.
    Delegates, liquidity providers, and cover providers can all claim available rewards throughout the process

Pool-level parameters

These parameters are determined by the Pool Delegate & the DAO when first configuring and deploying the pool contract.

Static parameters: cannot be changed after pool deployment

Pool delegate address: address that manages the pool.
Late fees: penalty fees when borrowers miss Bitcoin reward payments to the pool.
Premium fees: penalty fees when borrowers chose to repay early.

Flexible parameters: can be changed after pool deployment

Pool cover Fee: the percentage of the Bitcoin rewards generated by the pool that is given to pool cover providers.
Pool Delegate Fee: the percentage of the Bitcoin rewards generated by the pool that is given to pool delegate.
Pool capacity: total Bitcoin liquidity value a pool will accept. Once this value is reached, the pool has no more capacity for additional Bitcoin liquidity.
Lockup period: this period determines the length of time Bitcoin liquidity in a pool must be locked prior to withdrawal by LPs. The period can be decreased by the pool delegate, but not increased.
Open To Public: whether anyone can add Bitcoin funds to the pool or only whitelisted addresses.

Global parameters

Cooldown Period: the cooldown period is a period of time require to pass after an LP or pool cover LP initiates withdraw.
Treasury Fee: Bitcoin fee sent to the Zest DAO Treasury from every loan drawn down from the protocol.
Grace period: amount of time a Bitcoin reward payment can be late without incurring premium fees on behalf of the borrower.