Protocol Reserve

Instead of traditional collateral, a borrower must make a small upfront deposit, called the Protocol Reserve ($R$), to secure a Loan Slot.

The deposit is calculated to be slightly larger than the total expected interest payment, acting as a security for the lender. It is a multiple ($α$) of the total borrow fee:

$$R=α⋅x⋅L⋅APR_{borrow​}$$

where $x$ is the loan slot share and $L$ is the pool liquidity.

A key innovation of Firyx is that this deposit does not sit idle; it is added to the Loan Position's liquidity, generating additional yield for the entire pool.