Originating, informing and ramping...

Understanding Oracles in the Kona Ecosystem

Oracles play a pivotal role in bridging traditional finance (TradFi) and decentralized finance (DeFi). They ensure our smart contracts receive the necessary data inputs and can be broadly categorized into three types:

1. Origination Oracles (OO):

  • Definition:

    • These are typically fintechs or entities that tap into embedded finance opportunities. They cater to a diverse clientele with specific capital requirements.
  • Integration with Kona:

    • OOs don't have to modify their existing user experience to leverage Kona's liquidity. The complexities of web3 infrastructure are seamlessly hidden.
    • Their main responsibility is to seek permission from Kona's DAO to tap into the liquidity, based on predefined eligibility criteria.
    • Upon approval, they can either connect directly via the Loan Manager smart contract or utilize our API.
    • They can then be a part of Kona's cycles, gain votes from stakers, and access the senior liquidity pool.
    • During these cycles, they propose loans, providing all necessary details. The Loan Manager contract then vets these proposals based on a variety of criteria before sanctioning the loan.
    • Finally, funds are directly transferred to the borrower.

2. Information Oracles (IO):

  • Definition:

    • These are data providers that offer information services to the platform. They serve as a verification layer for the data shared by OOs.
  • Role:

    • IOs function as read-only entities, furnishing the platform with critical validation before capital is allocated.
    • Each loan type aligns with a specific IO, and it's imperative that IOs operate without any influence from the corresponding OO.

3. Ramp Oracle (RO):

  • Definition:

    • These oracles serve dual key purposes: acting as the real-world representative for all loans and managing the crypto/fiat conversion process.
  • Importance:

    • ROs facilitate a seamless integration between DeFi and TradFi landscapes, ensuring both investors and borrowers experience minimal friction.
    • They represent the lender's interests in the traditional world, stepping in especially during defaults to safeguard lender interests.
    • It's worth noting that ROs are the exclusive entities within Kona that maintain formal contracts with the platform, playing an indispensable role throughout a loan's lifecycle.

Permissions and Permissions:

All Oracles function within a permissioned framework and need to secure approval from DAO governance to operate.

Additional Insights on Origination Oracles:

  • Insurance Contributions:

    • OOs have the flexibility to contribute to insurance pools against their loans. This not only allows them to partake in the surplus spread of the loans they're involved in but also helps in reducing their cost of capital.
    • It's crucial to understand that these insurance funds are kept separate and aren't used for loan disbursements.
  • Capital Deployment:

    • Oracles aren't involved directly in the loan disbursement process. All funds are routed directly to the borrower.