Credit Delegation

Credit delegation allows a supplier to contribute liquidity to Tydro to earn interest, and delegate their borrowing power (i.e. their credit) to another address. The enforcement of the borrow position and its terms are agreed upon between the supplier (delegator) and the borrower (delegatee), which can happen either off-chain (via legal agreements) or on-chain (via smart contracts).

This enables:

• The delegator to earn extra yield on top of their base lending yield

• The delegatee to access uncollateralized liquidity

Borrowing by a delegatee must be consistent with the delegator’s eMode category. For example, if a delegator is in the STABLECOINS eMode:

• Delegatee can only borrow assets within the STABLECOINS category

• If a delegatee attempts to borrow a non-STABLECOIN asset (e.g. WETH), the transaction will revert

Additionally, the delegatee cannot cause liquidation of the delegator. If a delegated borrow causes the delegator’s Health Factor to drop below the liquidation threshold, the transaction will fail.

Approving the delegation

The approveDelegation or delegationWithSig function on the VariableDebtToken contract must be called by the supplier (delegator), approving the borrower (delegatee) a certain amount.

This is done for each debt token that needs to be delegated.

The delegator does not need to already have supplied funds in the protocol to approveDelegation. However, before the delegatee executes borrow, there must be sufficient collateral supplied by delegator in the protocol.

Borrowing the credit

The borrower (delegatee) calls the borrow function on the Pool, using the supplier's (delegator's) address in final parameter onBehalfOf.

The borrower's available credit is reduced by the borrowed amount.

Repaying the credit

Anyone can repay the borrow position OnBehalf of the user, by calling one of the following Pool functions - repay or repayWithPermit. The supplier (aka creditor) can also use the repayWithATokens function to repay a borrow position with their aTokens of the underlying asset in the same pool.