Flash Loans are a revolutionary concept in decentralized finance (DeFi) that allows users to borrow assets without providing collateral, as long as the loan is repaid within the same transaction. This innovative financial tool, pioneered by platforms like AAVE, has no real-world analogy and requires understanding how state is managed within blockchain transactions.

What are Flash Loans?

Flash Loans are uncollateralized, short-term loans available in the DeFi space.

• They allow users to borrow crypto with no upfront collateral

• Executed using smart contracts

• Available for a very short time (typically within one transaction block)

• Requiring repayment of the loan plus interest within the same transaction

If the borrower cannot repay, the entire transaction is canceled, and the funds are returned to the lender.

How Flash Loans Work

1. Smart Contract Creation: Borrowers must build a smart contract to request a flash loan. This contract includes instructions on how the loan will work, including payback steps, interest, and fees.

2. Borrowing: A user initiates a Flash Loan by borrowing tokens from a lending pool (e.g., Aave's lending pools).

3. Execution: The borrowed funds are used to perform a series of actions or trades within the same transaction.

4. Repayment: Before the transaction ends, the borrowed amount plus fees must be returned to the lending pool.

5. Validation: If the loan is repaid successfully, the transaction is confirmed and added to the blockchain. If not, the entire transaction is reverted as if it never happened.

Key Features

• Uncollateralized: No need to lock up assets as collateral before borrowing.

• Atomic Transactions: All operations occur within a single, indivisible transaction.

• Risk-Free for Lenders: If the loan isn't repaid, the transaction reverts, ensuring lenders don't lose funds.

• Fee-Based: Borrowers pay a fee for using the service (e.g., 0.09% on Aave).

• Short Duration: Loans must be repaid within the same transaction block.

Technical Underpinnings

Flash Loans leverage the atomic nature of blockchain transactions:

• As Neo X runs on EVM, its transactions share atomicity, meaning they must either be fully completed or not completed at all.

• If any part of the transaction fails (including loan repayment), the entire transaction is rolled back.

• This ensures that the lending pool always ends up with at least as much money as it started with.

Fees and Costs

• Flash loans typically come with a fee, which is a percentage of the borrowed amount.

• For example, Aave charges a 0.09% fee on the borrowed amount.

• Users must also consider gas fees for executing the transaction on the Ethereum network.

Use Cases

1. Arbitrage: Profit from price differences across various exchanges or platforms.

2. Collateral Swaps: Replace the collateral in an existing loan without closing the original position.

3. Debt Refinancing: Swap high-interest debt for lower-interest options.

4. Self-Liquidation: Liquidate your own positions to avoid liquidation penalties.

5. Complex DeFi Strategies: Execute sophisticated trading or yield farming strategies.

Historical Context

• Aave (formerly ETHLender) was the first DeFi platform to create flash loans.

• Before flash loans, users had to stake over-collateralized assets to borrow other digital assets.

• Flash loans revolutionized DeFi lending by allowing uncollateralized borrowing.

Limitations and Considerations

• Technical Expertise Required: Currently, Flash Loans are primarily accessible to developers who can write smart contract code.

• Gas Costs: The complex nature of Flash Loan transactions can result in high gas fees on the Ethereum network.

• Security Risks: While Flash Loans themselves are secure, they can be used in exploits if there are vulnerabilities in other smart contracts.

• High Risk: Flash loans are considered high-risk activities due to their complexity and the speed at which they must be executed.

Conclusion

Flash Loans represent a cutting-edge financial instrument in the DeFi space, offering unprecedented flexibility and opportunities for users who understand how to leverage them. As the technology matures, we can expect to see more accessible interfaces and diverse applications of Flash Loans in the broader DeFi ecosystem. However, users should be aware of the risks and technical requirements involved in utilizing this powerful tool.

High Efficiency Mode, or E-mode, is a powerful feature designed to maximize capital efficiency for users when dealing with assets that have correlated prices. This mode allows for higher loan-to-value (LTV) ratios, enabling users to borrow more against their collateral within specific asset categories.

How E-mode Works

E-mode groups assets with correlated prices into categories. When activated, users can enjoy increased borrowing power for assets within the same category. For example, stablecoins like USDC and USDT are all pegged to USD and would typically be in the same E-mode category.

Key Features:

1. Increased Borrowing Power: Users can borrow more against their collateral when both the collateral and borrowed assets are in the same E-mode category.

2. Category-Specific: E-mode is applied on a per-category basis. Different categories (e.g., stablecoins, ETH-correlated assets) may have different E-mode parameters.

3. Flexible Collateral Usage: E-mode does not restrict the use of other assets as collateral. Assets outside the E-mode category can still be supplied with their standard LTV and liquidation parameters.

Using E-mode

1. Activation: Users must manually activate E-mode for a specific category in their account settings. You must first repay all existing debts that are not in that selected category.

2. Borrowing: Once activated, users can borrow assets within the same category at higher LTV ratios.

3. Monitoring: Keep an eye on your health factor, as E-mode allows for higher leverage.

Example: Stablecoin E-mode

Let's consider a stablecoin E-mode category:

• You supply 10,000 USDC as collateral

• E-mode is activated for the stablecoin category

• The E-mode LTV for stablecoins is set to 97%

In this scenario, you could borrow up to 9,700 USDC or USDT (97% of your collateral value), significantly higher than the standard LTV for these assets.

Risks and Considerations

• Higher Leverage: E-mode allows for higher borrowing power, and even though you are borrowing a correlated asset, price deviations can happen occasionally so monitor your positions closely.

• Category Restrictions: You can only borrow assets within the same E-mode category.

• Market Fluctuations: Even correlated assets can experience price divergence. Stay informed about market conditions.

Liquidation is a critical risk management process in Intersect that helps maintain the protocol's solvency and protects lenders. It occurs when a borrower's position becomes undercollateralized, typically when their health factor drops below 1.

What Triggers a Liquidation?

A liquidation can be triggered when:

1. The value of the collateral decreases

2. The value of the borrowed assets increases

3. Accumulated interest causes the debt to exceed safe ratios

The health factor is a key metric that represents the safety of your borrowed position relative to your collateral.

How Liquidations Work in Intersect

When a position becomes eligible for liquidation:

1. Liquidators can repay up to 50% of the outstanding borrowed amount in a single asset.

2. In return, they receive a portion of the collateral, including a liquidation bonus.

3. The liquidation bonus varies by asset and can be found in the risk parameters section for each asset.

Liquidation in Practice: An Example

Let's consider an example:

Alice deposits 10 ETH and borrows 5000 USDC. If Alice's health factor drops below 1, her position becomes eligible for liquidation. A liquidator can then:

1. Repay up to 2500 USDC (50% of the borrowed amount)

2. Receive ETH from Alice's collateral, including the liquidation bonus

If the liquidation bonus for ETH is 10%, the liquidator would receive ETH equivalent to 2750 USDC (2500 USDC repaid + 250 USDC bonus).

Close Factor

The Close Factor is a crucial parameter in Intersect's liquidation process. It determines the maximum portion of a borrower's debt that can be repaid in a single liquidation event. Understanding the Close Factor is essential for both borrowers and potential liquidators.

Key points about the Close Factor:

1. Definition: The Close Factor represents the maximum percentage of a borrower's current borrowed value that can be repaid in a single liquidation transaction.

2. Dynamic Nature: The Close Factor is not fixed but scales dynamically based on the borrower's position:

   • It starts at a Minimum Close Factor when the Borrowed Value just passes the Liquidation Threshold.

   • It increases linearly up to 1.0 (100%) as the Borrowed Value approaches a Critical Borrowed Value.

3. Minimum Close Factor: In Intersect, the Minimum Close Factor is set to 0.1 (10%). This means that when a position first becomes eligible for liquidation, at least 10% of the borrowed amount can be repaid.

4. Critical Borrowed Value: This is the point at which the Close Factor reaches 1.0, allowing for full liquidation. It's calculated based on the Collateral Value, Liquidation Threshold, and a Complete Liquidation Threshold parameter.

5. Complete Liquidation Threshold: This parameter (set to 0.7 or 70% in the protocol) determines how far between the Liquidation Threshold and Collateral Value a borrower's position must deteriorate to allow full liquidation.

6. Small Positions: For very small positions that are eligible for liquidation, the Close Factor is always 1.0, allowing for complete liquidation in one transaction.

7. Governance Control: The Minimum Close Factor, Liquidation Thresholds (which vary by asset), and Complete Liquidation Threshold are parameters that can be adjusted through protocol governance.

Implications for Users

• For Borrowers: As your position's health deteriorates, a larger portion of your debt becomes eligible for liquidation in a single transaction. This incentivizes maintaining a healthy collateralization ratio to avoid substantial liquidations.

• For Liquidators: The amount you can liquidate in a single transaction depends on how undercollateralized the borrower's position is. Positions far below the liquidation threshold may be fully liquidatable in one transaction.

Understanding the Close Factor mechanism helps users better manage their risk and understand the potential implications of market movements on their borrowed positions.

To protect your position from liquidation:

1. Monitor Your Health Factor: Keep your health factor well above 1. A higher health factor provides a larger safety margin.

2. Add Collateral: Deposit additional assets to increase your collateralization ratio.

3. Repay Debt: Reducing your borrowed amount will improve your health factor.

4. Use Risk Management Tools: Consider using tools that can help monitor your position and alert you to potential risks.

5. Be Aware of Market Volatility: Pay attention to price fluctuations, especially for volatile assets or stablecoins that may depeg.

Participating in Liquidations

Liquidations on Intersect are open to all participants, but be aware:

1. The liquidation market is highly competitive.

2. Most successful liquidators use automated systems and bots.

3. Participating effectively requires technical knowledge and quick reaction times.

For those interested in becoming liquidators, refer to our developer documentation for more detailed information.

Remember, while liquidations are a necessary part of maintaining a healthy lending protocol, they can result in significant losses for borrowers. Always borrow responsibly and maintain a safe collateralization ratio.

What is Lending?

Lending

At Intersect, you can lend your assets, also known as supplying your assets, which is akin to depositing your asset into Intersect.

While Intersect doesn't impose minimum deposit amounts, each asset has a supply cap to manage risk and ensure protocol stability. Users can deposit up to this cap, which is carefully set based on market conditions and liquidity.

Withdrawals

Users can withdraw their assets from Intersect as long as:

1. The funds are not actively being used as collateral for borrowing.

2. Withdrawing the assets wouldn't trigger a liquidation on any of your existing loans.

3. The withdrawal doesn't exceed the available liquidity in the protocol.

Enabling Assets as Collateral

To use your deposited assets as collateral for borrowing, you need to enable them as collateral. This should be enabled by default. Once enabled, your Borrow Limit will automatically adjust based on the amount and type of collateral you've made available.

aTokens: Your Claim on Supplied Assets and Earnings

When you deposit assets into Intersect, you receive aTokens (e.g., aUSDC, aDAI) as a representation of your supplied balance. These aTokens are unique to Intersect and serve as your claim on the deposited assets plus any accrued interest.

The exchange rate between aTokens and the underlying asset appreciates over time as interest is earned. This means the value of your aTokens in relation to the original asset increases, reflecting your earned interest from both loan payments and flash loan fees.

How Much Will I Earn?

As an aToken holder on Intersect, your earnings evolve with market conditions and are derived from two main sources:

1. Interest Rate Payments on Loans

Suppliers share the interest paid by borrowers. Your earnings are based on:

• The average borrow rate

• The utilization rate of the asset

The higher the utilization of an asset pool, the higher the potential yield for suppliers. This dynamic system ensures that supply and demand in the market directly influence your earnings.

2. Flash Loan Fees

Intersect offers flash loans, a feature that allows users to borrow assets without collateral for the duration of a single transaction. Suppliers receive a share of the flash loan fees, which is a percentage of the flash loan volume. This provides an additional source of income on top of regular interest earnings.

Yield Calculation and Variability

Each asset on Intersect has its own market of supply and demand, resulting in a unique APY (Annual Percentage Yield) that changes over time. To help you evaluate potential earnings:

• Current APY is displayed for each asset, showing the current earning rate.

Remember, past performance doesn't guarantee future results. APYs can fluctuate significantly based on market conditions and user activity within the protocol.

Supply and Borrow Caps

Intersect implements supply and borrow caps for each asset:

• Supply Caps: Limit the total amount of an asset that can be supplied to the protocol. This helps manage risk and ensure the protocol's stability.

• Borrow Caps: Restrict the total amount of an asset that can be borrowed. This protects against excessive borrowing of any single asset.

These caps are carefully set and can be adjusted based on market conditions, liquidity, and risk assessments. Let's learn more about borrowing in the next section.

Remember, while Intersect strives to provide a secure and efficient platform, all DeFi activities carry inherent risks. Always conduct your own research and never invest more than you can afford to lose.

What is Borrowing?

Intersect allows users to borrow various cryptocurrencies by using their supplied assets as collateral. Here's what you need to know:

1. Collateral Requirement: To borrow, you must first supply assets to the protocol and enable them as collateral.

2. Borrowing Capacity: The amount you can borrow depends on the value of your collateral and the specific collateral factor for each asset.

3. Borrow Caps: Each asset has a borrow cap, which limits the total amount that can be borrowed protocol-wide. This helps manage risk and ensure stability.

4. Variable Interest Rates: Borrowers pay a variable interest rate that adjusts based on market conditions and utilization rates.

5. Health Factor: This metric indicates the safety of your borrowed position. Maintain a health factor above 1 to avoid liquidation.

Repayments

Repaying your borrowed assets is flexible and user-friendly:

1. Repayment Options: You can repay part or all of your borrowed amount at any time.

2. Interest Accrual: Interest accrues continuously, so the amount you owe increases over time.

3. Repayment Assets: You must repay in the same asset you borrowed, plus accrued interest.

4. Collateral Release: After repayment, you can withdraw your collateral if it's not being used to secure other loans.

Interest Rate Model: The Dual Curve System

Intersect utilizes a sophisticated dual curve interest rate model to determine borrowing rates. This system helps balance capital efficiency and risk management:

1. Optimal Utilization Rate: The model aims for an "optimal utilization rate," to balance capital efficiency and liquidity. The rate differs for each asset.

2. Two Interest Rate Curves:

   • First Curve (Up to Optimal Utilization): Interest rates increase gradually as utilization rises towards the optimal point.

   • Second Curve (Beyond Optimal Utilization): Interest rates rise more steeply to discourage excessive borrowing and maintain liquidity.

3. Dynamic Adjustment: Rates adjust automatically based on the current utilization rate of each asset pool.

4. Encouraging Liquidity: This model incentivizes liquidity provision when needed most by offering higher rates to lenders as utilization increases.

5. Mitigating Risk: The steep rate increase beyond optimal utilization helps protect the protocol from liquidity crunches.

6. Asset-Specific Parameters: Each asset in the protocol has its own set of parameters (like optimal utilization rate and curve steepness) tailored to its risk profile and market characteristics.

Understanding this model can help you make informed decisions about when to borrow or supply assets to the protocol. Keep in mind that while this system aims to optimize capital efficiency and risk management, market conditions can change rapidly, affecting interest rates and borrowing costs.

Remember, borrowing in DeFi carries risks, including potential liquidation if the value of your collateral falls. Always monitor your positions and maintain a healthy collateralization ratio.

How Liquidity Incentives Work

Liquidity incentives are an essential feature of the Intersect protocol, designed to encourage user participation and boost overall liquidity in the platform. By offering additional rewards for lending and/or borrowing activities, we aim to create a more vibrant and efficient DeFi ecosystem on Neo X.

Intersect can provide extra tokens as rewards to users who lend or borrow certain assets. These rewards are on top of the standard interest earned from lending or paid for borrowing.

Key Features:

1. Extra Rewards: Users receive additional tokens for participating in specific lending or borrowing markets.

2. Flexible Distribution: Incentives can be applied to either lenders, borrowers, or both, depending on the current needs of the protocol.

3. Time-Limited Campaigns: Incentive programs often run for specific periods to boost liquidity when needed most.

Types of Incentives

Lending Incentives

• Purpose: Encourage users to provide liquidity to the protocol.

• Mechanism: Lenders receive extra tokens based on the amount and duration of their deposits.

Borrowing Incentives

• Purpose: Stimulate borrowing activity for certain assets.

• Mechanism: Borrowers earn reward tokens based on their borrowed amount and duration.

Claiming Rewards

1. Accrual: Rewards accrue in real-time based on your lending or borrowing activity.

2. Claiming: Users can claim their earned rewards through the Intersect interface.

3. Frequency: There's no limit on claim frequency - claim as often as you like!

Example Scenario

Let's say Intersect is running a liquidity incentive program for USDC:

• You lend 10,000 USDC to the protocol.

• The current APY for lending USDC is 5%.

• There's an additional 2% APY in NEO tokens as a liquidity incentive.

In this case, you'd earn:

• 5% APY in USDC from standard lending interest

• An extra 2% APY worth of NEO tokens from the incentive program

Benefits and Considerations

Benefits:

• Boost your overall returns through extra token rewards.

• Contribute to the growth and efficiency of the Intersect ecosystem.

• Opportunity to accumulate tokens of promising projects.

Considerations:

• Incentive rates may change over time based on market conditions and protocol needs.

• The value of reward tokens may fluctuate, affecting the total value of your returns.

• Be aware of any tax implications in your jurisdiction for receiving additional tokens.

Staying Informed

• Check the Intersect app regularly for current incentive programs.

• Follow our social media channels for announcements about new or upcoming incentive campaigns.

• The community governance may propose and vote on changes to liquidity incentives, so stay engaged with Intersect's governance process.

Introduction

Intersect is the first lending protocol built on Neo X, designed to maximize capital efficiency in DeFi.

Our platform offers users a seamless experience for lending, borrowing, and earning yields in the rapidly evolving DeFi landscape. It also features innovative mechanisms like Efficiency Mode (E-Mode) and flash loans, offering an unparalleled opportunity to navigate the crypto world.

By participating in Intersect, you're not just using a DeFi platform – you're shaping the future of decentralized finance.

What is Neo X?

Neo X is an EVM-compatible sidechain incorporating Neo's distinctive dBFT consensus mechanism. Serving as a bridge between Neo N3 and the widely used EVM network, Neo X plays a crucial role in expanding the Neo ecosystem and offering developers more opportunities for innovation.

Why Choose Intersect?

1. Innovation on Neo X: As the first lending protocol on Neo X, Intersect leverages the blockchain's speed, scalability, and cost-effectiveness to provide an unparalleled user experience.

2. User-Centric Design: Whether you're a seasoned DeFi enthusiast or new to the space, our intuitive interface makes it easy to navigate.

3. Competitive Yields: Our dynamic interest rate model ensures that lenders earn attractive returns on their assets while borrowers access liquidity at fair rates.

4. Enhanced Security: Built on robust smart contracts, Intersect prioritizes the safety of your assets. Our code is open-source and has undergone rigorous auditing to ensure maximum security.

How Intersect Works

Intersect operates on a simple yet powerful principle: users can supply various crypto assets to earn interest, while also being able to borrow against their supplied assets as collateral. Here's a quick overview:

• Supplying Assets: Deposit your crypto and start earning interest immediately. Your supplied assets are represented by inTokens, which automatically accrue interest.

• Borrowing: Use your supplied assets as collateral to borrow other cryptocurrencies. Our over-collateralization model ensures the stability of the protocol.

• Interest Rates: Rates are algorithmically adjusted based on supply and demand, ensuring optimal utilization of the liquidity pools.

Unique Features

Intersect stands out from other lending markets by offering the following:

• Efficiency Mode (E-Mode): Maximize your capital efficiency when dealing with correlated assets.

• Flash Loans: Execute complex DeFi strategies with our uncollateralized loan feature.

• Intersect Points: Earn points for active participation and climb the leaderboard for exclusive benefits.

• Neo X Collateral: Intersect aims to be the first to offer popular Neo X assets as collateral and become a crucial pillar of DeFi for Neo X.

Join Our Community

Have questions or want to connect with other Intersect users? Join our vibrant community on Telegram and follow us on Twitter @Intersect_fi for the latest updates and discussions.

Remember, while we strive to provide a secure and efficient platform, all DeFi activities carry inherent risks. Always do your own research and never invest more than you can afford to lose.

Welcome to Intersect – where innovation meets opportunity in the world of decentralized finance!

Ready to dive in?

Check out the next section to learn how to deposit and begin your journey with Intersect. Whether you're looking to earn passive income, access liquidity, or explore advanced DeFi strategies, Intersect is your gateway to the future of finance.

We're excited to introduce Intersect Points, where your active participation in the Intersect ecosystem is recognized and rewarded.

By engaging with our platform, you'll earn Intersect Points (IP), which serve as a measure of your contribution and unlock various benefits within our ecosystem.

Testnet Phase: Earn Intersect Points (IP) While Testing

A pool of 1 million IP is waiting for you to help fine-tune the platform during our testnet!

You can freely mint tokens in the testnet to test the following actions and be rewarded with IP.

• First supply: 100 IP

• First borrow: 200 IP

• First repayment: 100 IP

• First withdrawal: 100 IP

• First liquidation: 500 IP

Points are calculated on an hourly basis, and are limited to the first time you execute that action. Repeated actions will not earn additional points.

Points earned during the testnet will be transferred to the mainnet. There will be another way of earning intersect points involving using real assets for mainnet.

Refer Others and Earn More Points

Create a referral link and share it with others to earn 15% of their points.

Why Earn Intersect Points?

Intersect Points are more than just numbers – they represent your active participation and contribution to the Intersect ecosystem. These points may play a crucial role in:

1. Governance participation

2. Access to exclusive features and products

3. Potential token airdrops

4. Tier-based benefits and rewards

5. Community recognition and leaderboards

Start earning points today and position yourself at the forefront of DeFi!

Note: The point system is subject to adjustments to ensure fairness and align with the protocol's growth. Stay tuned to our official channels for updates on new ways to earn points or use them.

Coming soon

Coming soon

Intersect DeFi Glossary

Borrowing: The act of obtaining assets from the protocol, secured by deposited collateral.

Borrowing Limit: A configurable ceiling on the total amount of a specific asset that can be borrowed, based on market liquidity and overall borrowed volume.

Collateral: Assets deposited as security for loans, subject to forfeiture if the loan is liquidated.

Leveraged Position: A financial arrangement created by depositing assets in the protocol's smart contract and using it as collateral to borrow other assets.

Decentralized Lending Platform: A permissionless financial system operating without intermediaries, facilitating lending and borrowing to enhance capital mobility.

Efficiency Mode (E-Mode): A feature allowing price-correlated assets (such as stablecoins) to be grouped for improved capital utilization.

Health Factor: A ratio indicating the safety of a loan, calculated using collateral value, liquidation thresholds, and borrowed amount. A value below 1 indicates risk of liquidation.

Restricted Asset Mode: A setting that confines borrowing to specific stablecoins and limits collateral to a single designated asset.

Lending: Providing assets to the protocol to generate interest income.

Collateralization Ratio: The maximum borrowing capacity of a given collateral, expressed as a percentage.

Forced Closure: The process of closing a position when its collateralization falls below the required threshold, triggered automatically by the protocol.

Liquidation Incentive: A reward offered to encourage rapid liquidation of under-collateralized positions, specified per asset type.

Liquidation Boundary: The point at which a borrowed position becomes under-collateralized and eligible for liquidation, defined per collateral type.

Position Closer: An entity that can initiate the liquidation of under-collateralized positions, receiving a portion of the collateral as compensation.

Asset Generation: The process of creating new protocol-specific tokens in an over-collateralized manner.

Intersect: The decentralized, non-custodial lending platform on Neo X, enabling users to lend, borrow, or participate in liquidations without intermediaries.

Excess Collateralization: A requirement that the value of deposited collateral exceeds the borrowed amount, with positions at risk of liquidation if the ratio falls too low.

Single-Asset Restriction: A mode limiting users to borrowing only one specific asset at a time.

Supply Ceiling: A configurable limit on the total amount of an asset that can be supplied to the protocol, based on market conditions and total collateral volume.

Coming soon

Coming soon

Intersect is built upon the battle-tested codebase of Aave, an established lending protocol that has undergone extensive audits and security reviews.

Coming soon