Lending (Supply/Borrow)

What is JamFi Lending

JamFi Lending is the core module of the ecosystem that enables decentralized borrowing and lending backed by crypto assets. Any user can act as a lender by depositing liquidity into pools and earning yield, or as a borrower by locking collateral and opening a debt position. Unlike traditional banking, where processes rely on intermediaries, JamFi relies entirely on smart contracts. These contracts handle deposits, issue loans, calculate interest rates, monitor the health of positions, and trigger liquidations if risk thresholds are breached. This makes the protocol transparent, predictable, and resistant to human error.

From its inception, JamFi has been designed as a global, multi-chain platform. Users can deposit liquidity on one chain and borrow assets on another, all under unified rates and conditions. This model removes the problem of fragmented liquidity, a common weakness in DeFi today, and allows JamFi Lending to act not just as a borrowing market, but as an infrastructure layer that unifies liquidity across networks into a single system.

Roles and Lifecycle

There are three main roles in JamFi Lending: depositors, borrowers, and liquidators. Depositors supply assets to liquidity pools and receive liquidity tokens (jamiUSDC, jamiUSDT) that automatically accrue interest. Borrowers open positions by pledging collateral and borrowing assets under defined risk parameters. Liquidators monitor risky positions and purchase collateral from undercollateralized accounts, earning incentives for performing this vital function.

The lifecycle of a credit position follows a clear process. A user deposits assets and receives a liquidity token. That token, or another supported asset, can be pledged as collateral to open a borrowing position. Interest accrues in real time, increasing the outstanding debt. When repaying, interest is settled first, followed by the principal. If the user’s health factor falls below 1, the system automatically triggers liquidation. This ensures that pools remain solvent and depositors are protected, while borrowers always know the conditions under which their collateral may be liquidated.

Markets and Risk Isolation

JamFi organizes lending markets by asset class to ensure strong risk management. Stablecoins are placed in base pools with higher loan-to-value ratios (LTVs) and softer liquidation thresholds, reflecting their lower volatility. More volatile assets are placed in isolated pools with stricter parameters. This ensures that risks in a single asset cannot cascade through the system, protecting the integrity of JamFi as a whole.

In addition, JamFi supports permissioned pools for institutional investors and corporate clients. These pools can operate under customized rules, with specific requirements for admission, reporting, and risk limits. This dual structure allows JamFi to serve both retail and institutional markets, offering flexibility for diverse users while keeping systemic risk under control.

Collateral and Health Factor

Collateral valuation in JamFi is based on an oracle router that aggregates multiple data sources and fallback mechanisms. For each borrower, the protocol calculates a Health Factor (HF) — the key metric of solvency. HF expresses the ratio of the discounted value of collateral to the value of debt. A position is considered safe when HF ≥ 1 and becomes subject to liquidation when HF < 1.

HF = ( Σ [Collateral × Price × CollateralFactor] ) / ( Σ [Debt × Price] )

Collateral factors and liquidation thresholds are defined per asset. Stablecoins are assigned higher factors due to their price stability, while volatile tokens have lower limits. This balances borrower accessibility with lender safety. For users, this means that safer assets allow for larger loans, while riskier collateral may require more conservative borrowing.

Interest Rate Model

Interest rates in JamFi are dynamic and determined by the utilization rate of the pool. The higher the demand for liquidity, the higher the borrow rate, while depositors’ yields increase in parallel. This creates a natural balance between supply and demand without the need for manual intervention.

The base formulas are:

BorrowRate  = BaseRate + U × Slope
SupplyRate  = BorrowRate × (1 − ReserveFactor) × U

For assets with heavy demand, JamFi employs a multi-tiered kink model, where rates rise sharply once utilization crosses certain thresholds. This prevents pools from overheating and helps stabilize markets. All parameters — base rates, slopes, and kink points — are governed by DAO, allowing the community to adapt the model to market conditions.

Borrowing, Repayment and Withdrawals

Borrowing in JamFi is straightforward. A user pledges collateral, selects an asset and amount to borrow, and the protocol validates health factors and market limits before issuing the loan. Interest accrues in real time, reflected in the debt index.

Repayment can be partial or full. Interest is repaid first, followed by the principal. Depositors can withdraw liquidity up to the available reserves, while the system prevents withdrawals that would compromise solvency or reduce health factors below safe levels. This ensures stability for all participants even during periods of market stress.

Liquidations

When a borrower’s HF drops below 1, the liquidation process is triggered. JamFi uses a Dutch auction model where collateral is offered at a discount that decreases over time until a liquidator executes the purchase. This design minimizes market impact and reduces losses for both borrowers and lenders.

Parameters such as the close factor (maximum portion of debt that can be liquidated at once), liquidation incentive (discount for liquidators), and auction settings are determined by DAO governance. This ensures predictability and fairness, motivating liquidators to actively secure the system while providing borrowers with transparent rules.

Oracles and Pricing Safeguards

JamFi relies on an oracle router that aggregates multiple sources to calculate fair asset prices. This protects the system from manipulation and ensures accurate data for collateral valuation. If a price feed deviates significantly from the median or updates too slowly, the protocol temporarily halts new borrowing until reliable data is restored.

For multi-chain assets, JamFi introduces the Asset Correlation Factor (ACF). This metric ensures that the price of the same asset remains synchronized across networks. If ACF diverges beyond safe limits, the protocol may pause operations for that asset, preventing local anomalies or oracle failures from affecting the global liquidity pool. Together, oracles and ACF form a layered defense against inaccurate pricing.

Unified Liquidity and GLF

A defining feature of JamFi is its Unified Liquidity Model. Deposits of assets like USDC and USDT across different chains are aggregated into a single global state. This allows a user to deposit liquidity on Ethereum and borrow on Polygon or BNB Chain under the same conditions.

To maintain balance across networks, JamFi applies the Global Liquidity Factor (GLF). GLF measures the share of an asset’s liquidity in a given chain relative to the protocol’s global liquidity. When a chain becomes over- or under-supplied, JamFi leverages partner bridges to redistribute assets. This maintains consistent borrowing conditions, efficient capital use, and a seamless user experience across all chains.

Fees and Protocol Revenue

Revenue in JamFi Lending comes from three main sources: the spread between borrower and depositor rates, liquidation fees, and service charges. A portion of this revenue is directed to the treasury and used for $JAMI buybacks, reserves, and further protocol development.

This model ensures that lending not only provides yield to users, but also supports the value of $JAMI itself. Token holders benefit directly from the growth of the lending markets, aligning user incentives with the protocol’s long-term sustainability.

Governance-Managed Parameters

All critical parameters of the lending module are controlled by the DAO. These include supply and borrow caps, LTV ratios, liquidation thresholds, interest rate curve parameters (base rate, slopes, kinks), reserve factors, liquidation incentives, the list of supported assets, and even the oracle sources used by the protocol.

Changes are implemented through governance proposals and a timelock system. This ensures that no parameter can be altered unexpectedly, giving users time to review and prepare. Such predictability strengthens trust in the protocol and makes JamFi attractive for both retail and institutional participants.

Developer Notes

JamFi employs an index-based accounting system for interest accrual. Instead of updating every user’s balance whenever interest is accrued, the protocol maintains a scaled balance for each account and a global market index. A user’s effective balance is calculated as:

visibleBalance = scaledBalance × marketIndex

This approach drastically reduces gas costs and makes the system scalable to millions of users. It is a proven model used in leading DeFi protocols, and in JamFi it is extended to multi-chain liquidity: indexes are synchronized globally so that yields remain consistent across all supported networks. This ensures efficiency, accuracy, and scalability as the ecosystem grows.