Default

When a Loan enters default, the following rules apply:

Default Trigger

  • Any repayment delay of 90 days or more automatically becomes a default event.

  • The Platform formally declares the Loan in default and freezes all further issuance.

Immediate Effects

  1. Cease all PoL, EAB, and PoR accruals — no new Proof-of-Loan, Early Adopter Bonus, or Proof of Reputation tokens are minted.

  2. Forfeit locked PoR tokens - Any $8LENDS held in lock-up for Reputation cashback are seized and pooled for distribution.

  3. Collateral liquidation (if applicable) - Off-chain or on-chain collateral is sold; proceeds flow into the liquidation pool.

Recovery Pool Distribution

All assets in the liquidation pool — including forfeited PoR tokens, collateral proceeds, and any unpaid fees — are distributed in priority order across CT-token holders:

  1. High-priority CTs receive 100% of their face value (principal + interest) first.

  2. If funds remain, Middle-priority CTs are paid next, up to 100% of their face value.

  3. Any leftover is allocated to Low-priority CTs pro-rata.

Note: If the pool is insufficient to cover an entire stage, each priority class is paid pro rata within its tier.

Closing the Stage

  • Once distribution is complete, the Loan stage is marked Closed­/Defaulted.

  • All CT-tokens for that stage become non­-redeemable and may be burned or retained as historical records.

This process ensures that losses are absorbed first by lower-priority holders, while High-priority users enjoy the greatest protection in default scenarios.

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