Overview of Mutuum Finance

Mutuum Finance is a decentralized protocol that enables users to lend and borrow various digital assets through both pool-based (P2C) and direct (P2P) models. It aims to offer accessible liquidity, flexible interest rates, and a broad selection of supported tokens—catering to diverse risk profiles and strategies within the evolving DeFi ecosystem.

Mutuum Finance does not plan to enforce strict minimum or maximum deposit limits, allowing you to supply as little or as much as you choose. That said, very small deposits may be less practical due to transaction fees, and certain assets could be subject to supply caps determined by risk management. These caps aim to protect overall protocol solvency, so you should check any current limitations before depositing larger amounts.

In Mutuum’s P2C model, the interest you pay will shift dynamically based on real-time liquidity pool usage: higher utilization often leads to higher rates, while lower usage means more favorable terms. In the P2P model, you will negotiate interest rates directly with another user, resulting in customized agreements that may be higher or lower depending on asset volatility and market sentiment. Ultimately, your total cost will reflect these variables as well as any discounts or special terms the protocol plans to offer.

Any DeFi platform carries risks, including smart contract vulnerabilities, price volatility of collateral assets, and potential liquidity shortfalls. Because blockchain transactions are final, unexpected market events or exploit attempts may lead to sudden losses. Users should carefully assess their tolerance and stay informed about ongoing protocol developments.

Mutuum Finance intends to implement multiple layers of security and transparency once the platform launches. Planned measures include independent contract audits, rigorous overcollateralization requirements, and real-time monitoring of liquidity and price oracles. By keeping the code open-source and offering bug bounty programs, Mutuum aims to invite community-driven scrutiny and encourage quick disclosure of potential issues.

All deposits in Mutuum Finance reside in non-custodial smart contracts on the blockchain. You'll receive mtTokens representing your share of the liquidity pool, including accrued interest. Because the protocol cannot move or access your funds without your signature, you retain full control of your deposits. When you're ready to withdraw, you can redeem your mtTokens—assuming sufficient liquidity—along with any earned interest.

In Mutuum’s P2C model, you will deposit assets into a shared liquidity pool and earn interest that adapts to market supply and demand. As usage of the pool rises, so may your returns, but in less active periods, rates may decline. In the P2P model, you will lend directly to other users, setting custom terms. Your potential earnings can be higher but also riskier, since no pool redistributes interest. The final amount you earn will hinge on the volatility and demand for each asset, as well as your chosen lending strategy.

mtTokens are proof-of-deposit tokens you receive when supplying assets to the Mutuum liquidity pool. These tokens represent your stake and accrue interest over time. You’ll redeem them to reclaim your original deposit plus any earned yield.

Borrowing in Mutuum Finance will allow you to access liquidity without giving up ownership of your tokens. Rather than selling at a potentially unfavorable time or incurring taxable events, you will lock your assets as collateral while retaining exposure to future price increases. This tactic can help you fund new opportunities or short-term expenses without missing potential market gains, particularly if you believe your collateral’s value will keep growing.

Borrowing with collateral allows users to unlock liquidity without selling the assets they already hold, potentially avoiding capital gains taxes or missing out on future market growth. For instance, someone who believes their ETH will appreciate might use that as collateral to borrow stablecoins and invest elsewhere, or cover immediate expenses, while still retaining exposure to ETH’s price movements. A trader could also borrow to set up hedging strategies, amplify yields via leveraged positions, or seize timely opportunities in other parts of the market - all without relinquishing ownership of key assets.

Mutuum Finance allows you to repay your loan at any time, with no fixed end date. The position remains open as long as your collateral sufficiently covers the borrowed amount. If you decide to close out your position early, you simply settle any outstanding debt and interest, then reclaim your collateral in full.

Liquidations occur when a borrower’s collateral becomes insufficient to cover their outstanding debt, causing the protocol to sell or seize part of that collateral to recover the loan. If market conditions or price fluctuations drive your Stability Factor below the required threshold, Mutuum can trigger a liquidation to ensure the protocol remains fully backed. While it ensures the protocol remains solvent, timely monitoring and maintaining healthy collateralization can help users avoid liquidation.

Mutuum’s Stability Factor is a metric that indicates how well-collateralized your borrowing position is. It compares the total value of your locked collateral (adjusted by risk parameters) to your borrowed amount. A higher Stability Factor suggests a safer position, offering a stronger buffer against price fluctuations in your collateral assets.

If market conditions or price drops cause your Stability Factor to decline, you will face a growing risk of liquidation. Once your collateral no longer adequately covers the borrowed amount, the protocol may initiate a liquidation process, which involves selling part of your collateral to repay the debt. To avoid this outcome, you can supply more collateral or repay some of the borrowed funds, preserving a healthier Stability Factor.

The key is maintaining a healthy Stability Factor by ensuring your collateral always exceeds your debt. You can achieve this by supplying extra collateral when prices drop or by repaying part of your loan to reduce what you owe. Regularly monitoring market conditions can help you stay well above the liquidation threshold.

Mutuum imposes a penalty fee on liquidated collateral, meant to cover protocol risks and incentivize third-party liquidators to act swiftly. The exact percentage depends on each asset’s risk parameters. This fee is added to the outstanding debt during liquidation, so keeping your collateral above the required ratio is the best way to avoid it.