Overcollateralized Loan

Overcollateralized Loans are a foundational concept in DeFi, enabling users to borrow assets by locking up more value in collateral than the amount borrowed. Unlike uncollateralized loans, where creditworthiness is assessed off-chain, overcollateralized loans rely entirely on collateral to secure the loan and protect lenders.

In the Arkis ecosystem, overcollateralized loans are used as a secure way for Asset Managers to access working capital while maintaining ownership and control over their yield-generating strategies.

• Access liquidity without selling long-term positions

• Earn yield on deposited collateral while borrowing

• Real-time risk monitoring & automated liquidations

• Full on-chain transparency and control

• Seamless capital access through withdrawals to external wallets

How it Works

Asset Managers can deposit collateral into a Margin Account—such as:

• Pendle PT or YT tokens

• Curve LP tokens

• Liquid staking derivatives (e.g., stETH, rETH)

• Other yield-bearing or liquid ERC-20 assets

Once the collateral is deposited, the Arkis Margin Engine evaluates the real-time value and risk of the portfolio using stress-tested metrics and predefined LTVs for each asset. If the loan request is within the allowed limits, the Asset Manager can borrow stablecoins (e.g., USDC) or other approved tokens from the Liquidity Pool.

The borrowed funds can be:

• Used onchain in whitelisted protocols (e.g., trading, hedging, farming), or

• Withdrawn to an external wallet

All operations are governed by the rules of the specific Liquidity Pool and the Margin Account’s agreement.

Example:

An Asset Manager wants to extract liquidity from a Pendle LP token that is yield-generating and highly liquid:

1. They deposit $1,000 worth of Pendle PT tokens into their Arkis Margin Account.
2. Arkis has set the LTV for Pendle PT tokens at 60%.

3. Based on this, the Asset Manager is eligible to borrow $600 in USDC.

4. They choose to withdraw $600 USDC to an external wallet to fund a strategy on a CEX or use it in an OTC deal.

5. Meanwhile, the Pendle LP continues to accrue yield within the Margin Account, reducing effective borrowing cost.

If the value of the collateral drops below the safe threshold, the Arkis Margin Engine will issue a margin call or initiate Liquidation to maintain the system’s integrity and protect lenders.