Borrowers

Definition: The borrower is an individual or entity that seeks to obtain a loan from the liquidity pool by collateralizing their real-world assets. Borrowers are receivers of loan fund disbursements and are obligated to payback the loan according to the contract.

Explanation: Borrowers in a real-world assets tokenization liquidity pool typically include asset owners, businesses, or other entities that need access to capital. They provide tokenized real-world assets (such as real estate, invoices, or commodities) as collateral to secure loans issued in stablecoins or other cryptocurrencies from the liquidity pool.

Who They Are:

• Asset Owners: Individuals or businesses that own physical assets like real estate, commodities, or intellectual property and seek liquidity by using these assets as collateral.

• Businesses: Small and medium-sized enterprises (SMEs), startups, or established companies looking for capital to fund operations, growth, or other business activities.

• Entities with Tokenizable Assets: Any entity that possesses assets suitable for tokenization and is willing to use those assets to secure a loan.

What They Do:

• Collateralize Assets: Borrowers tokenize their real-world assets and use these tokens as collateral to secure loans from the liquidity pool.

• Obtain Loans: They receive the loan amount in stablecoins or other cryptocurrencies, which they can then convert to fiat currency or use directly for their needs.

• Repay Loans: Borrowers are required to repay the loan amount along with any agreed-upon interest and fees according to the loan agreement terms.

Responsibilities:

• Maintaining Collateral Value: Ensure that the tokenized assets used as collateral maintain their value and meet the requirements set by the liquidity pool.

• Repaying the Loan: Adhere to the repayment schedule outlined in the loan agreement, including principal, interest, and any associated fees.

• Providing Accurate Information: Supply truthful and accurate information about the assets being collateralized, including their value, condition, and legal status.

• Compliance: Follow all applicable laws, regulations, and protocol rules related to the loan and collateralization process.

Consequences of Default:

• Collateral Seizure: If a borrower defaults on the loan, the tokenized assets used as collateral can be seized by the liquidity pool to cover the outstanding loan amount.

• Liquidation of Collateral: The seized collateral may be liquidated (sold) to recover the loan amount. This can involve selling the tokenized assets on secondary markets or other platforms.

• Loss of Ownership: Defaulting borrowers lose ownership of the collateralized assets once they are seized and liquidated.

• Credit Impact: Defaulting may impact the borrower’s creditworthiness and ability to obtain future loans, both within the tokenization protocol and in traditional financial systems.

• Legal and Financial Penalties: Depending on the jurisdiction and specific terms of the loan agreement, borrowers may face additional legal and financial penalties for defaulting on their loan obligations.