Covenant Finance enables the minting of tradeable debt against various debt structures, or debt covenants. These structures are mostly based on variations of liquidation triggers (when is a loan is open to liquidation), collateral types, and collateral oracles. Below is a short summary of some debt types that Covenant enables:

  • Margin (MTM) Loans - Margin loans are based on liquid collateral (e.g., ETH), where loans and liquidations are based on the collateral MarkToMarket (MTM) and an Loan-to-Value (LTV) parameter

  • NonMTM Loans - non-MarkToMarket loans do not use collateral value as a liquidation trigger, but instead measure how much interest has accrued against the loan. If a watermark is reached (e.g., 10% of the loan amount) without the Borrower paying some of that interest back, then the loan can be liquidated

  • Protocol Debt - this is a nonMTM loan, in which the borrower is a Protocol or DAO

You can find additional details in the followin sections

Last updated