Credit Expansion & Refinancing
This is the most subtle part of the system and the heart of V2.
Fixed Loan Refinancing Window
Two days before any individual loan expires, the system:
Calculates how much capacity is needed to allow that borrower to refinance.
Makes that amount publicly available as new borrowable OADA credit.
If the borrower picks it up the loan is seamlessly rolled into a new 30 day term
If other borrowers pick it up instead, the system expands credit further to make refinancing liquidity available again.
Thus, the system behaves like a Just-In-Time refinancing engine with dynamic supply.
Maximum Market Size vs Active Credit
Each collateral asset has a maximum credit cap (e.g., 1M OADA against SNEK).
However not all of this cap is made available at once.
The system allows only a portion to be active so there is headroom to mint fresh OADA for refinancing.
The system permits only part of the Maximum Market Size to be lent out in order for the unused Active Credit portion to offer a refinancing buffer. It is important to note that the Active Credit portion is needed to accommodate increased debt incurred when refinancing a loan, thus organically expanding credit lines as they are needed.
Automatic expansion
If refinancing liquidity is consumed by others, the system automatically expands the available credit up to the asset’s max. The system makes it difficult for borrowers to be pushed out by other borrowers out during the refinancing period by:
Credit auto expansion
Reserve capacity and ODAO Treasury backstops
Manual last resort refinancing is possible via partially signed transactions
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