# Cedro Finance Documentation Cedro Finance is a cross-chain decentralized modular liquidity protocol where users can lend and borrow assets natively across multiple chains with affordable transaction fees. Lenders are able to deposit their assets to contribute to the liquidity of the platform and borrowers are able to borrow the liquidity in an overcollateralized manner. This documentation will provide different resources to understand this protocol better. Use our protocol at: Join our community on: Twitter: Telegram: Discord: Collabs and Partnerships: # FAQs ## What is Cedro Finance? Cedro Finance is a cross-chain decentralized liquidity protocol where users can lend and borrow the listed assets. Lenders are able to deposit their assets to contribute to the liquidity of the platform and borrowers are able to borrow the liquidity in an overcollateralized manner. ## ## Why should I use Cedro Finance? You have numerous reasons to use Cedro Finance. To list a few: * We connect fragmented liquidity across chains, which means higher capital efficiency. So, for lenders and borrowers, it means better rates on assets. * You can open positions on multiple chains with ease. Hence, you don't have to miss financial opportunities on any chain. * First-class User Experience. With other protocols, you need to use multiple third-party services and numerous clicks to open positions across chains. However, you can achieve this in <5 clicks with us. * Secure and easily scalable. Thanks to our top-notch architecture. And many more! ## Why do I have to keep changing the network for different transactions? Because of our protocol architecture design, if you are depositing or repaying, then you have to interact with the smart contract on the chain of that asset. However, if you are Borrowing, Withdrawing, or Liquidating, you can do that directly in the Root without having to switch networks. ## What is Cedro Unified Liquidity Token (CULT)? Currently, many of the multi-chain assets are treated as different assets, hence liquidity fragmentation at an asset level. For example, USDC is live on multiple chains like Ethereum, Solana, Polygon, etc. However, they are treated as a unique asset on each chain. So, with our novel architecture, we are able to virtually merge the liquidity of these assets across chains. From the user's perspective, the origin chain of their multichain asset deposit will be abstracted away. This is our novel feature: CULT. We are connecting the liquidity flow of multiple chains. Hence, capital efficiency times 100. On top of that, we are merging the liquidity of multi-chain assets. Hence, capital efficiency times INFINITY! ## Can I trust my fund with Cedro Finance? We understand the suspicion among users since we've seen multiple cases of scams in this industry. However, we are a decentralized protocol. This means the funds are sent to our smart contracts, which are accessible to anyone. Hence, everything is completely transparent. The smart contract controls the funds, and no one has direct access to them. We write these smart contracts with security as our top priority, and we spend a significant amount of time testing them. On top of that, these smart contracts are audited by multiple reputed organizations before going live. So, in short, yes, you can trust Cedro Finance with your fund. ## How costly is a transaction on Cedro Finance? The cost varies based on the chain you are operating on and its current usage. Making a cross-chain call can be relatively a bit expensive operation. With this in our mind, we designed the protocol to make sure that the frequency of cross-chain calls is as low as possible. In fact, for some operations, there's no cross-chain call at all. Even with that, our [Computation Offloading](/features/computation-offloading) process makes the transaction cost very affordable. ## What are Root and Branch? The Root is the smart contract that aggregates the protocol data and the Branch is a liquidity pool storage contract deployed on all chains. Learn more at Join our [Discord server](https://discord.gg/R2KmG7bSEm) to interact with other members of our community who'll help answer your questions. # Cedro as an Ecosystem
One of the major goals of Cedro Finance is to act as a cross-chain Liquidity Layer over time. Builders will be able to use Cedro's Liquidity and codebase to build their applications without having to worry about liquidity on their platform. A few out of the many applications that can be built using Cedro as the infrastructure are: * Overcollateralized Decentralized Omnichain Stablecoins (ex. DAI for cross-chain) * Peer-to-Peer Cross-chain Lending & Borrowing Platforms (ex. Morpho for cross-chain) * Cross-chain DEXs (ex. Stargate) * Omnichain Yield Aggregators (ex. Yearn for cross-chain) * Cross-chain Perpetual Trading Platforms * Credit line for fiat Platforms And many more... Some of these applications will be built in-house and, at the same time, builders will be incentivized through various programs to help build the Cedro Ecosystem. # Protocol Architecture Cedro Finance is comprised of 3 major components: * Branch * COMPA * Root

Protocol Architecture

A branch is deployed across multiple chains, all of which interact with the Root, which is deployed on a single chain that stores the global states of the protocol and passes information across chains. Branches and Root interact using COMPA. This modular design is important for the scalability of the protocol. To add a new chain to the protocol, all we have to do is to deploy the Branch on that chain and establish a connection to the Root. ## Branch The Branch is the main point of interaction for the users for Deposit and Repay operations. For example, if a user wants to deposit USDC in Ethereum, then the user will interact with the depositRequest() function of the Branch in Ethereum. The deposited amount is stored in the USDC Liquidity Pool at Ethereum, the information is sent to the Root using Messenger, and the user receives ceToken on the Root chain. A Branch handles asset pools on each chain it is deployed to. That means when a user deposits AVAX on Avalanche, it is sent to the AVAX pool which is managed by the Branch itself. There is a pool for each asset listed in Cedro, which stores the fund in the Branch but is managed by Root. To add a new chain to the protocol, the Branch is deployed on that chain and then a Messenger connection is established between the Root and the Branch. ## COMPA COMPA is a stack of multiple generic cross-chain messaging protocols. COMPA analyses different factors like estimated transaction cost, speed, security, etc. to choose a messaging protocol from the stack for a given transaction. The advantage of having a cross-chain messaging protocol aggregator is that it provides another degree of freedom to the user. Users can choose the protocol they want or let Cedro choose it based on their priorities for cost, speed, security, etc. Once a protocol is chosen, it is used to send the desired cross-chain message to/from the Root. For now, we are using LayerZero in COMPA. ## Root The Root is deployed in a single chain and is the point of connection for all of the Branches. It acts like the brain of the protocol. Every Brach is connected to the Root in a bidirectional manner using COMPA. Root stores all the protocol's global variables, including the total deposited amount across multiple chains, total borrowed amount, Total protocol liquidity, etc. So whenever a user deposits an asset on Chain A, the information is passed to the Root chain, to update the user's liquidity and asset liquidity. Storing such information in the Root helps the protocol be simpler, more organized, and less prone to attacks. Users interact with the Root for Borrow, Withdraw, and Liquidate operations. This division of operations in Root and Branch is done to optimize the number of cross-chain calls for each operation. On top of these, Root also computes interest rates for all the assets. This plays a vital role in our CULT feature. # CULT (Cedro Unified Liquidity Token)

CULT

In the world of multiple isolated blockchains, projects that are looking to expand have no other option than to issue their token separately across multiple isolated chains. For example, UNI is deployed on multiple chains, which means it’ll have a liquidity pool on each chain with no interconnection. This fractures the already fractured liquidity and reduces capital efficiency. This problem is tackled by Cedro Unified Liquidity Token. It is a novel feature developed by Cedro. CULT lets users deposit multi-chain assets (ex. USDT, UNI, etc.) from different chains and add them to a unified liquidity pool. For example, when a lender deposits 100 USDC in Ethereum and 200 USDC in Solana, they’ll receive 300 ceUSDC on the Root chain and receive interest on them. Because of the unified liquidity pool, the capital will be concentrated in a single pool and the efficiency will be maximal. The interest rate will be the same across all the chains for multi-chain assets. On top of that, users can borrow the asset on any supported chain which makes multi-chain assets truly chain agnostic. This means we are merging the Liquidity Pools at an asset level and sending capital efficiency to the moon :rocket: . The Liquidity Pools aren't literally merged though. We are virtually able to merge the pools since all the global state variables are stored in the Root. For the merging, we introduce two additional parameters: Global Liquidity Factor (GLF) and Asset Correlation Factor (ACF). ## Global Liquidity Factor (GLF) GLF ranges from 0 to 1. It is the ratio of liquidity of a multi-chain asset in a chain to the total protocol liquidity of that asset. This factor is assigned to each multi-chain asset in each chain. For example, if the total USDC deposited across all the chains in the protocol is $50M, and out of this, $25M is in Ethereum, then the GLF of $$USDC\_{Ethereum}$$ is 0.5. Each chain will have an Optimal GLF decided based on different factors like total asset volume, utilization rate, total network volume, etc. If the difference is >*minGLFThreshold*, then a protocol partner bridge is used to transfer the asset from the chain having excess liquidity to the chain with low liquidity. ## Asset Correlation Factor (ACF) As the name suggests, this parameter calculates the correlation between the prices of two assets. For a multi-chain asset, the ACF should be \~1. However, if this factor deviates by 0.002, Cedro's investigation team will be notified and shall look into the irregularity. This process is in place to prevent the protocol from getting affected by any unfortunate event in this highly volatile space. If the deviation keeps increasing, all the operations on the particular pool will be suspended until a case-specific solution is decided by the investigation team. # Dynamic Liquidation The liquidation mechanism around current lending and borrowing solutions is unfair towards the borrowers. This is mostly due to the fixed closing factor and liquidation incentives. For example, in Aave, when a debt position becomes unhealthy, up to 50% of their collateral is allowed to be liquidated, without consideration of amount required to take the position back to a healthy posi- tion. If a user’s position is unhealthy by an amount of $10 and the collateral is $5000, then $2500 of the user’s collateral is forced to be liquidated. This, com- bined with a fixed liquidation bonus, is what causes a toxic liquidation spiral as demonstrated by Chaudhary et. al. This increases the amount of bad debt incurred by the protocol as we witnessed with Avi Eisenberg’s attack on Aave on November 2022. To mitigate this and make the model fair to borrowers, we will improve upon Aave’s model and develop a dynamic liquidation system. ## Dynamic Liquidation Incentives $$ L.I. = max (0, min(L.I.\_{base} \* \frac{1}{LTV} - 1 -e) $$ Where L.I.*base* is the maximum discount provided for the liquidation. The discount is L.I.*base* under normal circumstances, whenever LTV approaches 1, the discount starts decreasing to avoid liquidation spiral. ## Dynamic Closing Factor $$ c = min(c\_0 \* \frac{1-LTV}{1-LTV\_{liq}} + \frac{LTV-LTV\_{liq}}{1-LTV\_{liq}},1) $$ LTVliq is the liquidation threshold of an asset and c0 is the minimum closing factor which is a protocol set parameter. Closing factor is c0 when LTV = LTVliq and keeps increasing until LTV = 1, where closing factor is also 1. This model prevents a toxic liquidation spiral, and hence reduces the probability of Cedro incurring a huge amount of bad debt. # Isolated Market Pools An asset introduced to a Lending & Borrowing platform means a borrower can borrow any available asset in the pool using the introduced asset as collateral. So introducing a new asset exposes the entire protocol liquidity to insolvency risk. Hence, the platform has to be very picky and exclusive when introducing a new asset. This means a protocol is missing out on a huge chunk of liquidity. This also is against the principle of inclusivity and the widespread adoption of DeFi. To mitigate this problem, Cedro utilizes Isolated Market Pools. With this, an asset that is considered risky can be introduced into an Isolated Market Pool. Each of such pools is comprised of a few risky assets and a few stable assets which are completely separate from the main market. An Isolated asset will have a hard borrow limit, and the user will be able to borrow only the stable assets inside the pool against the collateralized isolated asset. This will make sure that newer assets can be included in the pool without exposing the entire market to insolvency risk. This can also be a lucrative option for lenders since the interest rates for such pools are usually high because of the risk associated with them. HIGH RISK HIGH REWARD. # Computation Offloading The transaction fee for using platforms like Aave on Ethereum is extremely high even during the bear market. This is because the fee is decided based on the complexity of the smart contract. Since such platforms have a complex monolithic codebase, the transaction cost is always high. Therefore, to mitigate this problem we are utilizing our architecture to offload the computation. With our architecture, each Branch contract is there just to store the liquidity pools. All of the heavy computations of the protocol like interest rate calculation, tracking different assets, tracking different positions, liquidations, etc happen in the Root, which is deployed in a chain with negligible transaction costs. Therefore, by doing this, we are essentially optimizing the gas cost by a large magnitude. This makes our protocol exteremly affordable for all users. # Risk Mitigation Model A Lending & Borrowing Platform has many risks associated with it. Here are a few risk mitigation techniques Cedro Finance uses to protect the protocol from unfortunate events. ## Fractionalizer using CULT, we virtually merge the liquidity of assets across different chains. There could arise a scenario where one of chains or a particular asset that is a part of CULT could collapse. This would lead to depegging of the ceToken which could be hazardous. When an asset collapses, there are going to be losses to multiple parties involved. With the fractionalizer algorithm, we maximize the fairness of loss distribution across all the parties involved. Even though we unify the multichain assets deposited from multiple chains and mint the same ceToken, we still keep an internal balance variable named *balancePerChain\[user]\[chainId]* where *user* is the user address and *chainId* is the id associated with a particular chain. Lets take a few scenarios. ### Deposit If a user deposits x amount from a chain with chainId A, then after minting the ceToken, we update the variable as *balancePerChain\[user]\[A] += x* ### Withdraw If a user wants to withdraw x on chain A, then there can be a few possibilities. **Case 1:** When *balancePerChain\[user]\[A] > x,* *balancePerChain\[user]\[A] -= x* **Case 2:** When *balancePerChain\[user]\[A] < x*, Say the initial condition is, *balancePerChain\[user]\[A] = a* *balancePerChain\[user]\[B] = b* *balancePerChain\[user]\[C] = c* *balancePerChain\[user]\[D] = d* ***Total deposited** = (a + b + c + d)* First we deduct all of the deposit made from A, *balancePerChain\[user]\[A] = 0* Then, we proportionately deduct the liquidity from each chain, ba*lancePerChain\[user]\[B] = b - (x-a) \* (b/(b+c+d))* *balancePerChain\[user]\[C] = c - (x-a) \* (c/(b+c+d))* *balancePerChain\[user]\[D] = d - (x-a) \* (d/(b+c+d))* Lets say the asset on chain B starts depegging. Now we need to make sure it doesn't affect the whole system. To do this, the protocol declares the asset on chain B as dead which is essentially a circuit breaker for a token. Taking the same scenario as above, but with chain B be declared as dead, we have, *balancePerChain\[user]\[A] = 0* *balancePerChain\[user]\[B] = b* *balancePerChain\[user]\[C] = c - (x-a) \* (c/(c+d))* *balancePerChain\[user]\[D] = d - (x-a) \* (d/(c+d))* The asset can either be later declared undead or can be separately withdrawn using *withdrawDeadTokens*() method. ## Supply and Borrow cap During the event of an asset collapse or a big dump leading to an asset collapse, the liquidity pools in our protocol are largely affected. To mitigate this, a supply and borrow cap is introduced which ranges from 0 to 1. It is the ratio of the total amount of an asset supplied/borrowed to the total liquidity of the protocol. This cap is decided based on the safety ratings given to an asset by the protocol. ## Volatility cap In case an asset price starts getting highly volatile i.e. outside the range of the volatility cap, the asset operations will be temporarily frozen. The investigation committee will quickly look into the case and analyze the situation. The operations will be unfrozen once they confirm that the volatility isn't caused by the protocol fault. This cap is decided for each asset based on it time-weighted price, stability, reputation, market cap, etc. # Oracles Cedro Finance uses Chainlink oracle as the price feed for our assets. Chainlink is a highly reputed and secure oracle. It is very unlikely for Chainlink to perform maliciously based on its history. However, as a risk mitigation process, we will also have a secondary oracle. In case the price feed starts acting strangely, the secondary oracle will take the place of the main price feed. # Deposit This page will demonstrate how to deposit an asset in Cedro Finance. * Go to and connect your wallet.
* In the navigation bar, click on Get Test Token button to receive Cedro test tokens (assets to deposit) and Native test tokens (for gas).
* Go to the Market tab from the navigation bar, where you can choose the network and the asset you want to deposit. Click on the Detail button to learn more about the asset.
* On the asset detail page, click on the Supply button. You will be prompted to change the network to the network of the asset if you aren't already connected.
* Enter the amount you want to supply and click on Supply.
That's all from your side. Voila! you've done your first deposit on Cedro Finance. The information will be sent to the Root chain. After that, your transaction will be successful. The status of a transaction can be tracked in the Transaction History tab from Dashboard. The asset supplied will show up in your collateral list in the Dashboard after it is successful. You'll also receive ceUSDC which will be burnt when you withdraw.
Keep playing around and add assets to your portfolio! # Borrow This page will demonstrate how to borrow an asset from Cedro Finance. * Go to the Market tab, choose the network and asset you want to borrow, and click on Detail button.
* Inside the Asset Detail page, click on the Borrow button.
* You need to switch the chain to the Root (Mumbai testnet) chain because Borrow, Withdraw, and Liquidate actions are performed in the Root chain.
* Enter the amount you want to borrow and click Borrow. Always keep an eye on your Health Factor.
This request is sent to the chain you're borrowing the asset from. You'll receive the asset once the transaction is successful. You'll also receive debtAVAX token which will be burnt once you repay the loan. # Repay This page will demonstrate how to repay a loan in Cedro Finance. Repaying a loan is a simple process. It is comprised of two steps. * In the borrow list in Dashboard, look for the borrow position you want to repay and click Repay.
* Enter the amount you want to repay and click Repay.
That's all! You've repaid your loan. # Withdraw This page will demonstrate how to withdraw a deposit in Cedro Finance. Withdrawing is a simple process. It is comprised of two steps. * In the Collateral List in Dashboard, look for the supply position you want to withdraw and click Withdraw.
* Enter the amount you want to repay and click Repay.
That's all! You've withdrawn your deposit. One more thing. Since USDC is a multi-chain asset, you can withdraw it on any chain that USDC resides in by changing the chain from the Current Chain menu above Withdraw button. All thanks to our CULT feature.