CDI Architecture

The proposed architectural framework aims to address the specific risks associated with under-collateralized loans in the Lucia Protocol, effectively creating a decentralized marketplace for lending. Figure 2 illustrates the structural components of this insurance mechanism.

Utilizing Stable Crypto Assets for Premium Payments

It's worth emphasizing that the Lucia Protocol opts for stable cryptocurrency assets, such as USDT, USDC, and DAI, as the preferred medium for insurance premium payments. This strategic choice mitigates the volatility risks often associated with cryptocurrency-to-fiat currency exchange rates. Additional asset types will be considered for future integration.

Independence and Modularity of Lucia's Credit Default Insurance (CDI)

From an architectural standpoint, Lucia Protocol employs its proprietary Credit Default Insurance (CDI) solution. This is specifically tailored to safeguard both users and lenders participating in Lucia's lending activities. Notably, our CDI operates via a dedicated smart contract, which is distinct from any other lending protocols and solely manages the insurance logic for our unique lending framework.

Flexibility of the Architectural Design

The architecture is modular by design, enabling rapid adaptations and updates to the system as required. This feature enhances the Protocol's agility in responding to market demands and risk landscapes.