> ## Documentation Index
> Fetch the complete documentation index at: https://docs.axiosfinance.xyz/llms.txt
> Use this file to discover all available pages before exploring further.

# Litepaper

> The comprehensive guide to Axios Finance

# Executive Summary

Axios Finance is a **peer-to-peer lending protocol** built on the Fuel Network that enables users to borrow and lend cryptocurrency with **fixed interest rates** and **custom terms**. Unlike traditional DeFi lending pools where rates fluctuate based on utilization, Axios matches borrowers directly with lenders, ensuring both parties know their exact returns or costs upfront.

## The Problem: Unpredictable DeFi Lending

Current crypto lending platforms like Aave and Compound operate on a **shared pool model**:

* Interest rates change constantly based on supply and demand
* A lender earning 5% APY today might earn 2% tomorrow
* Borrowers face the same uncertainty with loan costs
* **Planning is impossible when rates are unpredictable**

> \[!IMPORTANT]
> Variable rates create uncertainty. You can't plan your finances when your costs or returns change daily.

## The Solution: Fixed-Rate Peer-to-Peer Lending

Axios introduces a fundamentally different approach:

| Feature            | Axios (Fixed P2P)    | Pool-Based (Aave/Compound) |
| ------------------ | -------------------- | -------------------------- |
| **Rate Stability** | ✅ Locked at creation | ❌ Changes constantly       |
| **Custom Terms**   | ✅ Full control       | ❌ Standardized             |
| **Counterparty**   | One matched user     | Shared pool                |
| **Risk Isolation** | ✅ Independent loans  | ❌ Pool-wide exposure       |
| **Predictability** | ✅ Known outcomes     | ❌ Variable returns         |

## Core Mechanisms

### Collateralization

All loans are **over-collateralized** to protect lenders:

* **Conservative**: 150% (borrow $10k with $15k collateral)
* **Moderate**: 130% (borrow $10k with $13k collateral)
* **Risky**: 120% (borrow $10k with $12k collateral)

Higher collateral = safer for lenders = potentially lower interest rates.

### Liquidation

Liquidation protects lenders when loans become unsafe:

**Trigger Conditions:**

1. **Missed Repayment**: Loan expired without repayment
2. **Collateral Value Drop**: Below safety threshold (if enabled)

**Liquidation Distribution:**

| Recipient  | Amount               |
| ---------- | -------------------- |
| Lender     | Principal + 2% bonus |
| Liquidator | 0.7% of collateral   |
| Protocol   | 0.3% of collateral   |
| Borrower   | Remaining balance    |

### Oracle Integration

Axios uses **Stork oracles** for real-time price data:

* Continuous price updates
* Multiple data sources aggregated
* Fair liquidation price determination

## Fee Structure

### Protocol Fee: 10% of Interest (5% During Beta)

**Example Transaction:**

* **Borrower requests**: 10,000 USDC
* **Repayment amount**: 11,000 USDC
* **Interest generated**: 1,000 USDC

**Distribution:**

* **Lender receives**: 10,900 USDC
* **Protocol fee**: 100 USDC (10% of interest)
* **Borrower total cost**: 11,000 USDC

> \[!NOTE]
> Fees are calculated on interest only, never on principal. This is significantly lower than the spread on traditional lending platforms.

## Use Cases

### Scenario 1: The Crypto Holder

**Sarah's Situation:**

* Owns 10 ETH worth \$35,000
* Needs \$20,000 for a business opportunity
* Believes ETH price will rise

**Axios Solution:**

1. Borrows 20,000 USDC for 90 days
2. Deposits 8 ETH (\$28,000) as collateral
3. Agrees to repay 21,000 USDC (5% interest)
4. Uses funds for business
5. Repays and retrieves ETH

**Result:** Maintained ETH exposure + accessed capital for only \$1,000 in interest.

### Scenario 2: The Yield Seeker

**Michael's Situation:**

* Has 50,000 USDC sitting idle
* Wants predictable returns
* Uncomfortable with variable rates

**Axios Solution:**

1. Creates loan offer: 50,000 USDC for 30 days
2. Requires 150% collateral ratio
3. Demands 50,500 USDC repayment (12% APY)
4. Receives repayment after 30 days
5. Earns 450 USDC net profit (after 50 USDC fee)

**Result:** Earned 10.8% APY net with strong collateral protection.

## Technical Architecture

### Built on Fuel Network

| Aspect                      | Details                                    |
| --------------------------- | ------------------------------------------ |
| **Network**                 | Fuel - High-performance modular blockchain |
| **Transaction Fees**        | \$0.01-0.50 per transaction                |
| **Confirmation Time**       | Seconds                                    |
| **Smart Contract Language** | Sway                                       |
| **Toolchain**               | Forc 0.69.1                                |

**Why Fuel?**

* Low transaction costs for accessible lending
* Fast execution for real-time matching
* Modern architecture built for efficiency

## Security Model

**Key Security Features:**

* **Open Source**: All contracts publicly auditable
* **Automated Enforcement**: No human intervention possible
* **Isolated Positions**: Your loan is independent of others
* **Oracle Redundancy**: Multiple price sources (planned)

## Risk Disclosure

### For Borrowers

| Risk                 | Mitigation                              |
| -------------------- | --------------------------------------- |
| **Liquidation**      | Use 150%+ collateral ratios             |
| **Price Volatility** | Set price alerts, monitor health factor |
| **Deadline Miss**    | Set reminders, repay early if volatile  |

### For Lenders

| Risk                     | Mitigation                            |
| ------------------------ | ------------------------------------- |
| **Capital Lock-up**      | Only lend funds not needed short-term |
| **Counterparty Default** | High collateral requirements          |
| **Extreme Market Crash** | Require higher LTV ratios             |

### Protocol Risks

| Risk                    | Status                                   |
| ----------------------- | ---------------------------------------- |
| **Smart Contract Bugs** | Audits pending, start with small amounts |
| **Oracle Failure**      | Multiple oracle sources planned          |
| **No Insurance Fund**   | Users bear all risk currently            |

> \[!CAUTION]
> Axios Finance is experimental software. Never invest more than you can afford to lose.

## Roadmap

### ✅ Current (Beta Phase)

* Core lending and borrowing
* Fixed-rate peer-to-peer matching
* Automated liquidations
* Stork oracle integration
* Reduced protocol fee (5%)

### 🔄 Coming Soon

* **Passive Vaults**: where users can deposit and forget and that would be used to facilitate loans on chain by vault managers
* **Secondary Market**: Sell loan positions before maturity
* **Multi-Collateral**: Combine assets to reduce liquidation risk
* **Partial Fills**: Multiple lenders for large requests
* **Advanced Analytics**: Risk scoring and performance tracking

## Getting Started

### Prerequisites

1. Fuel-compatible wallet (Fuel Wallet browser extension)
2. Crypto assets (to borrow against or lend)
3. Basic understanding of collateral and liquidation

### Quick Start Guide

**For Borrowers:**

1. Connect wallet → Click "Borrow"
2. Select asset, amount, and collateral
3. Choose duration and confirm terms
4. Wait for lender match
5. Receive funds → Repay before deadline

**For Lenders:**

1. Connect wallet → Click "Lend"
2. Browse requests or create offer
3. Set terms and required collateral
4. Wait for borrower match
5. Receive repayment automatically