How It Works
Every loan on Stormbit is hedged with a put option on the borrower's collateral. The put strike equals the protection level — the price floor where insurance fully covers the lender's deposit.
Example: $80,000 loan, 2 BTC collateral.
Protection level = $80,000 / 2 = $40,000/BTC.
$60,000
$120,000
$0
$120,000
$40,000
$80,000
$0
$80,000
$20,000
$40,000
$40,000
$80,000
$0
$0
$80,000
$80,000
Below the protection level, every dollar lost on collateral is exactly recovered by insurance. The lender is always made whole.
Premium pricing — Derived from real options market data. Three inputs: LTV (higher = more expensive), duration (longer = more expensive), implied volatility (higher = more expensive). The borrower pays the premium upfront. It flows to lenders as yield.
Loan terms — Each market has specific parameters: principal asset, collateral type, max LTV, duration, and interest rate. Lenders deposit into markets. Borrowers borrow from them. Once funded, no liquidation until maturity.
Settlement — Lazy. Interest and premiums are recorded at repayment and distributed when lenders interact (deposit, withdraw, or settle). Gas-efficient at scale.
Defaults — Collateral enters a Dutch auction in Deals. Price starts above market and drops over time. First buyer wins. Insurance covers any shortfall to the lender.
Last updated