To enable borrowing rate discovery and exiting, Atlendis sets up an order book limited to the bid side via the creation of sub-pools called ticks. A tick is a sub-pool of funds within the borrower's pool that corresponds to a specific lending rate. When adding liquidity to the pool, lenders choose their desired lending rate and their funds are then placed into the corresponding tick. The lending pool's ticks can be transposed to an order book, limited to the bid side.
Borrowing always starts from the lowest rate to the highest rate, which allows the borrowing rate to be discovered by the market.
As the Atlendis protocol is designed for under-collateralized borrowing and caters to different types of borrowers with various use cases and levels of risk, Atlendis believes that setting rates algorithmically based on liquidity would not properly reflect the level of risk that lenders are taking.
On Atlendis, liquidity providers have the possibility to set their own lending rate, which means they can choose the amount of risk they are willing to take for the potential return they desire. The bid order book enables market rate discovery.
By using an order book, Atlendis removes also potential conflict of interest between the platform and the borrowers.
Lenders can make their own risk assessment of borrowers and select the rate at which they are willing to lend for the level of risk they have evaluated. Liquidity providers can lend at their chosen lending rate, for each pool. This means that if their funds are borrowed, the liquidity providers will realize exactly their desired return at repayment time. It also allows lenders to exit their position even when it's actively borrowed. The exiting position is replaced by the unborrowed position starting from the lowest rate to the highest rate. The amount withdrawable is derived from the state of the order book at exit time.
This secondary market opens many new strategies for liquidity providers to monitor their positions
Atlendis' model for order books provides borrowers with access to a fair and competitive market where multiple liquidity providers compete with each other to offer the best possible terms. This eliminates the issue of borrowers having to negotiate with a single dominant liquidity provider, ensuring a level playing field for all parties involved.
In addition, Atlendis' model allows borrowers to access a fixed borrowing rate, providing them with greater visibility and predictability regarding their cost of capital.