Pool delegates manage BTC lending pools on Zest Protocol. Zest Protocol provides a decentralised infrastructure enabling pool delegates to attract global Bitcoin capital and provide funding to a network of vetted borrowers, increasing their potential AUM while earning performance fees.
Each Bitcoin liquidity pool is managed by a pool delegate. The Pool delegate is responsible for negotiating loan terms with borrowers, performing diligence, and liquidating collateral in the event of a default. Pool delegates review a borrower's reputation, expertise, and performance to evaluate terms of the loan. Once the borrower and pool delegate agree to the borrower rate and collateral ratio, pool delegates fund the loans from their managed pool.
Pool delegates are appointed by the Zest Protocol DAO contract. In case of abuse, the Zest Protocol DAO contract can freeze a pool and recall the loans.
Create Bitcoin Pool and Attract Funding
Once whitelisted, pool delegates complete a pool delegate profile to be published alongside their pool. This profile will include their background, their strategy for the lending pool, and the target yield. Pool delegates will be required to add tokens to their lending pool cover to serve as a reserve of first-loss capital in the pool and to align the delegate's interests with pool liquidity providers. Once, set up the pool is open for BTC funds and the delegates can start attracting capital.
Permissioned or Permissionless
Pool delegates can choose to run their pool with permissionless LPs or with a permissioned whitelisted address list of LPs.
It is possible for a pool delegate to launch a pool with only their own funds. These pool delegates would be motivated to use Zest Protocol to underwrite loans transparently on chain and attract more AUM through transparency in their operations.
Interested Borrowers create a Request for Quote (RFQ) for a loan on Zest. The RFQs are funneled to pool delegates who initiate conversations on terms and due diligence requirements. This involves a review of the borrower's reputation, management background, and fund strategy. Pool delegates also request Borrowers for financial statements for confidential review. The borrower's RFQ will propose terms and the pool delegate may make a counter-offer.
If a sudden and material change in market conditions occurs, a pool delegate might consider one or more borrowers to no longer be as credit-worthy as when the loan was originated. In this case, the pool delegate can call back loans (pending approval from the Zest DAO contract).
Agree Terms and Fund Bitcoin Loan from Pool
Once an agreement is reached between borrower and pool delegate, the borrower will create the on-chain loan request and the pool delegate will be able to approve a transfer of Bitcoin funds from their designated lending pool.
Manage Balance in Bitcoin Pool
While overseeing their lending pool, pool delegates should be mindful of maintaining a sufficient balance in the lending pool to enable withdrawals by LPs.
Interested in becoming a pool delegate?
All pool delegates on Zest must be whitelisted prior to establishing a lending pool. Pool delegates are funds and industry professionals with credit experience. If you'd like to explore becoming a pool delegate, please connect with the Zest team.
For the Zest Protocol launch, we're seeking to partner with a very limited number of pool delegates. We believe that Zest Protocol will benefit from a careful roll-out in the long run. This strategy includes working closely with limited delegates as we scale up.