👨👨👧👦 Liquidity providers (LPs) [the everyday user]: Liquidity providers add BTC to a liquidity pool from which loans are funded that earn yield in BTC for the liquidity providers to the pool (at time of writing borrowers pay about 4-6% for borrowing BTC undercollateralised on CeFi venues).
👨💼 Pool delegates: are credit experts who launch and manage liquidity pools. Pool delegates perform diligence and agree terms with borrowers following their own strategy and underwriting process. Pool delegates earn by sharing in the reward payments.
🏢 Borrowers: institutions looking for Bitcoin capital to grow their business. Likely candidates are market makers, exchanges, centralised lenders, miners and businesses that accept BTC payments. Borrowers must be approved by a Pool Delegate to borrow BTC from that pool delegate’s liquidity pool.
🛖 Pool cover providers: provide pool cover by staking tokens as first loss capital for a specific pool. If a borrower defaults, funds in the cover are used to make liquidity providers whole. Pool cover providers receive a percentage of the rewards earned from borrowers.
It is possible for participants to have more than one function. Pool delegates will add liquidity to their own pool cover, LPs could decide to provide liquidity to the pool cover of the pool they provided liquidity to, Pool delegates could decide to provide liquidity to their own pool, etc.