Spigot - Onchain Revenue Collateralization
The Spigot is the first innovation that Debt DAO is bringing to the onchain lending ecosystem.
This is the first time that trustless revenue-based financing has been available on chain for protocols and DAOs to use. The Spigot will allow lenders to have trustless assurances that a borrower will repay a loan by securing a portion of a borrower's onchain cashflows to automatically repay interest and principal. The Spigot will escrow 100% revenue if a Borrower defaults. This is the first time lender protections for priority repayment have been enforceable trustlessly onchain for any type of loan, collateralized or undercollateralized.
On top of protecting Lenders, the Spigot also benefits borrowers since they are able to take out larger loans at lower interest rates. Borrowers gain access to the most flexible, low-rate loans with no upfront collateral Lenders have confidence that their loan is backed by verifiable on-chain revenues.
This is how crypto-native under-collateralized lending works.
The Spigot has 4 main functions:
  1. 1.
    Direct control over revenue generating contracts. Borrowers cannot change where revenue streams go and rugpull the loan. This is a common attack vector if you tried to use Superfluid or other streaming contracts that are not designed to be collateral.
  2. 2.
    Borrowers can still manage their products/protocols using whitelisted functions. This ensures that revenue can still be generated to repay the loan
  3. 3.
    Escrows a fixed percentage of these revenue streams while diverting the rest to the borrower's treasury. This percentage is based on the health of the loan and is programmed into the Loan contract.
  4. 4.
    Allow Debt DAO loan contracts to pull escrowed revenue and automatically pay back interest and principal on your loan.
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