Lux Credit Lending extends the isolated lending market framework (LP-044) with reputation-based credit scoring. Borrowers with established on-chain history (Karma score, LP-056) can access reduced collateral requirements -- down to 50% LTV compared to the standard 80-86%. Credit tiers are non-transferable and decay with inactivity. The protocol maintains a first-loss insurance tranche funded by the interest rate premium on credit loans.
Higher LTV means lower collateral required (Gold tier borrowers post 50% collateral for 100% loan value).
The borrower's Karma score (LP-056) determines their tier:
function getCreditTier(address borrower) public view returns (uint8) {
uint256 karma = IKarma(karmaContract).scoreOf(borrower);
if (karma >= 2000) return TIER_GOLD;
if (karma >= 500) return TIER_SILVER;
if (karma >= 100) return TIER_BRONZE;
return TIER_STANDARD;
}
The rate premium on credit loans funds a first-loss insurance pool:
Credit loans have the same liquidation mechanics as LP-044, but with tighter monitoring:
If a credit loan becomes insolvent (bad debt):
1. Insurance reserve absorbs the loss (up to reserve balance)
2. Borrower's Karma score is reduced by 50%
3. Borrower is downgraded to Standard tier for 90 days
4. Default event is recorded on-chain (permanent)
To access credit tiers above Standard:
1. Karma gaming: artificial activity to inflate Karma is mitigated by the decay function and activity quality weighting in LP-056.
2. Insurance underfunding: if defaults exceed the insurance reserve, standard lenders bear the loss. The 5% target is calibrated to historical DeFi default rates.
3. Tier manipulation: tier is checked at borrow time. A borrower whose Karma drops cannot open new credit loans but existing loans remain at their original terms.
github.com/luxfi/standard/contracts/lending/credit/ |CreditManager.sol |Copyright (C) 2024-2026, Lux Partners Limited. All rights reserved.
Licensed under the MIT License.