Debt DAO Docs

Secured Line of Credit

A debt 'primitive'
In this section we introduce the main features of Debt DAO's Secured Line of Credit.
Whilst the underlying Line of Credit contract can be deployed alone for cases where there's little perceived credit risk, it's not advisable. We don't recommend using the contracts in any unsecured manner with no collateral or enforcement mechanisms.
There are currently two different ways for a Lender to protect their principal using either revenue-based security and/or and traditional collateral.
Revenue-Based Financing
The revenue-based financing approach, facilitated by the Spigot, automatically takes a part of the Borrower's revenue to repay the loan. It otherwise provides security through having Trustless Recourse to the revenue of the Borrower in any event of default.
Collateralised Lending
This more conventional approach takes tokens deposited as collateral and uses their spot price to calculate a collateral ratio. If the collateral ratio falls below the minimum required then then loan will become eligible for liquidation.