Lotus Markets
Lotus is an onchain lending protocol that lets lenders and borrowers meet on a risk curve inside a single market. Instead of creating separate pools for every risk setting, Lotus uses tranches to offer multiple risk levels while keeping liquidity connected.
Quick links
Markets and Tranches → what you’re choosing
Liquidity Flow → how liquidity is shared
Utilization and Rates → how demand affects pricing
Liquidations and Bad Debt → what happens under stress
How to lend
You choose a market.
You choose a tranche (your risk level).
You supply the market’s loan token to that tranche.
Lenders get control over their risk-return profile
How to borrow
You choose a market.
You choose a tranche (your risk level).
You supply the tranche’s collateral token and borrow the market’s loan token.
Borrowers get control over their loan's terms and rate
What makes Lotus different?
A market contains multiple tranches ordered by risk (senior to junior).
Unused liquidity from junior tranches can support more senior borrowers. This keeps markets deep without forcing everyone into the same risk profile.
Interest and loss allocation follow the tranche structure, so risk and reward stay aligned.
What is a risk curve?
Each tranche in a market carries a different liquidation loan-to-value (LLTV). Higher LLTV means more risk for lenders and a higher borrow rate. Plotting rates against LLTVs produces the market's risk curve.
Key concepts
A market is a set of tranches ordered by risk.
All markets are currently ordered by the liquidation loan-to-value ratio (LLTV).
A tranche is where users borrow and lend from within a market.
Tranches are ordered from senior to junior.
Liquidity flows from junior to senior. If there is unutilized liquidity in a tranche, it cascades and is made available to the next more senior tranche.
LLTV
Lower
Higher
Risk to Lenders
Lower
Higher
Yield
Lower
Higher
A Note on Terminology
Lotus uses "junior" and "senior" differently than traditional finance. In conventional debt structures, seniority refers to payment priority — senior creditors are repaid first, junior creditors absorb losses first.
In Lotus, these terms refer to risk appetite. A junior tranche has a higher LLTV, backing riskier loans. A senior tranche has a lower LLTV, serving borrowers with more conservative collateral ratios. The distinction is about which risk parameters a lender accepts, not payment priority.
When junior capital cascades to senior tranches, it is treated equally with capital supplied directly there. Interest and losses are allocated proportionally based on actual exposure, not based on where the capital originated. If you are familiar with traditional capital stack logic, set aside those assumptions before proceeding.
FAQ
How are tranches ordered?
Tranches are ordered by risk. Risk can vary based on LLTV, collateral type, oracle choice, or other parameters.
Can tranches use different collateral?
Yes. Each tranche has its own collateral, oracle, and LLTV. Tranches can share the same collateral but must differ on at least one risk parameter.
Do junior lenders earn from senior borrowers?
Yes. Unutilized junior supply cascades to senior tranches. When senior borrowers use that liquidity, the interest flows back to all suppliers whose capital was used — including the junior suppliers — in proportion to each tranche's supply utilization.
Next: Read Markets and tranches to understand what you’re choosing when you pick a market and a tranche.
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