2.1 Lending Lifecycle

TrustBridge facilitates decentralized microloans through programmable lending pools and on-chain collateralization.

1. Loan Request

Borrowers connect their wallet and select an active lending pool. They specify:

• Loan amount

• Purpose

• Duration They must lock a fixed percentage (e.g. 20%) of the loan amount in XLM as collateral.

2. Liquidity Allocation

Once initiated:

• 80% of lender deposits go to active liquidity.

• 20% of lender funds go to a backstop reserve (insurance against defaults).

3. Disbursement

After Blend verifies that:

• The borrower’s collateral is sufficient, and

• The pool is not frozen or risky,

...the stablecoin (e.g. USDC) is sent to the borrower's wallet.

4. Interest Accrual

Lenders earn interest based on:

• Share of liquidity

• Pool utilization

• Dynamic rate adjustment by Blend

5. Repayment

Borrowers must repay the loan (principal + interest) before the deadline. If successful:

• Collateral is released

• TRBT score is increased

6. Default Handling

If the borrower fails to repay:

• XLM collateral is liquidated

• Backstop fund covers any remaining shortfall

7. Risk Monitoring & Freezing

Blend Engine monitors:

• Pool health

• Defaults

• Utilization and backstop

If thresholds are breached, the pool is frozen automatically.