Portfolios or Capital Pools

Understanding Portfolios in Kona

Capital pools or Portfoliosserve as the primary reservoir for Kona's lending system, facilitating liquidity and ensuring smooth loan operations.

Creation and Customization:

Capital pools can be initiated by diverse capital aggregators such as funds, dApps, or money managers. While Kona offers a foundational integration interface, pool creators possess the liberty to tailor their pools. This customization can include features like governance structures, associated fees, and lockup periods.

Cost of Capital:

Pools might predetermine a foundational cost of capital for each insurance amount. Striking a balance is essential – if pools set overly aggressive limits, they run the risk of having underutilized or idle capital. To counteract this, a preset amount of idle capital can be reclaimed before a cycle concludes.

The actual cost of capital, however, is shaped by market dynamics, specifically supply and demand. These rates are set at the onset of each cycle. Since pools have a hierarchical advantage over other capital within the system, their rates often align with prevailing interest rates and remain unaffected by surplus returns from loans.

Oracle Selection and Capital Distribution:

Pools can handpick the oracles they wish to fund. However, they don't have the autonomy to dictate the exact distribution of capital – this responsibility is entrusted to stakers.

Protection Mechanism:

Safety is paramount. Capital pools are shielded by the oracles' insurance pool. Naturally, if a pool lends to an oracle with minimal or absent insurance, the cost of capital will be on the higher side. For an intricate breakdown of how these components interact, please consult the Tokenomics Paper.

Investor Onboarding:

Capital Pools can seamlessly integrate investors. They have the option to leverage native currency stable coins (for instance, BRZ for Brazil) or use USDC. Any investment via USDC will be automatically hedged using Nakō, ensuring risk mitigation.

Pools that choose to integrate Nakō will have to fully KYC their users in order to take full advantage of the rate differential.