Functions and Architecture of the Lending Pool

The lending pool on the Arca Chain platform is a key component of the decentralized finance (DeFi) ecosystem. It aims to provide users with flexible, secure, and highly efficient borrowing and lending services. To further enhance the platform's functionality and appeal, the lending pool also supports the borrowing and lending of Bitcoin (BTC), thus expanding the scope of traditional digital asset lending. Below is a discussion of the detailed functions of the lending pool, the advantages of decentralized lending, risk management mechanisms, liquidity provision, and Bitcoin lending.

The lending pool achieves decentralized automated borrowing and lending services through smart contracts, allowing users to conduct lending operations without intermediaries. The design of the lending pool is based on market clearing principles and capital allocation theory, ensuring that the platform can effectively allocate resources and maximize the utilization of capital.

• Lending Function: Users can deposit their digital assets (such as USDG, ARCA, BTC, etc.) into the lending pool and earn interest. Borrowers can obtain loans from the lending pool by using assets as collateral. This design transfers resources from low-yield uses to high-yield uses through market mechanisms, in line with capital allocation theory.

• Smart Contract Driven: All the lending operations, including asset deposits, loans, interest calculations, and repayments, are automatically executed by smart contracts. This design enhances operational efficiency and ensures the security of user assets. The automatic execution of smart contracts eliminates intermediary steps, reducing transaction costs, aligning with Coase's transaction cost theory.

• Liquidity Provision: Users can not only participate in borrowing and lending but also earn additional income by providing liquidity. The assets provided by liquidity providers serve as the funding source for the lending pool and help maintain market stability through a supply-demand balance mechanism.

• Bitcoin Lending: The lending pool specifically supports Bitcoin lending, allowing users to use BTC as collateral on the platform to obtain assets such as USDG or ARCA, or to borrow BTC by using other assets as collateral. The introduction of Bitcoin lending expands users' investment and capital management options, thereby enhancing the platform's appeal.