Exit Mechanism

Where optimal capital efficiency meets liquidity

NillaConnect is built in a way where users are ensured liquidity immediately without having to wait, allowing them to enter/exit, or execute their actions instantly. So let's take a look at some scenarios where a supplier deposits his funds to NillaConnect:

  • Scenario 1: NillaConnect instantly finds a full match for the supplier's funds with some borrower(s). There is no need for substitute liquidity for this scenario as both parties instantly match and thus, they can both enjoy improved P2P rates.

  • Scenario 2: NillaConnect could not match the supplier's funds with any borrowers due to a lack of borrowing demand. All of the supplier's funds will automatically be supplied to the underlying pool to earn the pool's supply APY before being transferred to the borrower when they enter.

Withdrawing liquidity as a supplier

Currently, there are two methods that a supplier can withdraw their funds

1. Normal Withdrawal: debt is repaid

When the borrower repays their debt, the supplier's funds will be deposited into the underlying pool. Therefore, the funds can be withdrawn simply from the underlying pool.

2. Early Withdrawal: debt is not repaid

What if the supplier(s) wants to withdraw their funds while it is still matched, or in other words, not repaid? Suppliers can submit a debt sale order to trigger the debt sale mechanism to sell their debt to the next supplier in the queue in order to exit their position early.

This is only possible when there is available unmatched liquidity in the underlying pool.

With Nilla’s time limit model for N-accounts, the suppliers will be notified of the date which their funds will become available to withdraw. The suppliers may sell their debt at a discount to exit early, or they may have a portion of their rewards slashed to incentivize the borrowers to be in profit and exit.

Now what if the borrower wants to repay the supplier, but the supplier doesn't want to exit yet?

NillaConnect will try to find new borrower(s) so that the supplier's funds can be lent to them and both of them can enjoy their P2P APY. Given that there are no other borrowers NillaConnect will simply move the supplier's funds back to the underlying pool to receive the pool's APY.

However, there are also instances where the counterparties could not be matched not due to the lack of liquidity, but because of the gas limit for matching has been reached. Please continue reading the Matching Engine page to see how NillaConnect handles it.

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