Cooler Loans

This Gitbook describes and explains the functionality of Cooler Loans, a smart contract-based lending protocol inspired by Ruler Loans.

Unlike common DeFi lending in which loans pay dynamic and perpetual interest with price-based loan-to-value ratio's, Cooler Loans are fixed-interest, fixed-duration, and fixed-collateral. Loan terms are set at loan origination and upheld via smart contract until expiry.

Collateralization is maintained via escrow, which releases collateral to the lender if the borrower has not repaid their loan at a predefined time (called a Default). The borrower can repay their loan (with interest) at any time prior to the loan expiry to reclaim their collateral. Should that not occur, the lender takes possession of the collateral and relinquishes their expectation for repayment of principal. In this way, a default represents a swap between borrower and lender at the loan's loan-to-collateral ratio.

While a loan is outstanding, collateral is held in an escrow contract called a Cooler. Cooler-held collateral can be delegated to the address of the borrowers choosing, allowing them to retain governance rights in the protocol of their collateral (unlike general-pool CDP's which force borrowers to forfeit these rights and may even lend them to others).

The full codebase for Cooler Loans can be found here.