Credit LPs (Lenders)

On Twyne, Credit LPs (CLPs) are users that have supplied their assets to lending protocols like Euler or Aave but choose not to borrow against their collateral.

Twyne lets CLPs build on their lending experience by depositing their IOU tokens (e.g. eUSDC, aETH) to a Credit Vault, and delegate their unused borrowing power to others. This earns CLPs an orthogonal revenue stream on top of the base APY they already earn from the underlying lending market.

CLP Supply Rate

When a Credit LP delegates their borrowing power on Twyne, they effectively choose to underwrite another borrower’s loan. In exchange for taking on this extra risk, they earn an additional interest rate known as the CLP Supply Rate.

You can dive deeper into the math behind the CLP supply rate here.

Risk & protection

Credit LPs electively take on higher risk compared to passive lending on Euler or AAVE.

To mitigate CLP’s exposure, Twyne acts as the first-order liquidator, resolving borrower positions before they become eligible for liquidation on the base protocol. As long as the borrower is liquidated on Twyne, Credit LPs face no losses.

In cases of extreme price volatility and swift market downturns, there might be instances where nobody has inherited a risky debt or triggered a liquidation on Twyne in time. In such scenarios, the underlying protocol would kick in as the fallback liquidator, which would likely (though not always) incur losses for the Credit LP.

We have conducted thorough research and rigorous testing of the added risks that Credit LPs may face when using Twyne. You can read more about them in the Safety Mechanism section.