Yield, Borrowing Demand, and Velocity

Why payments turn episodic borrowing into a compounding system.

Traditional DeFi lending markets exhibit episodic borrowing demand. Users borrow capital to exploit a specific opportunity and repay when that opportunity resolves. Borrowing is sparse, irregular, and tightly coupled to market timing.

This can be represented as:

B_legacy(t) = Σ_{i=1..N} I_opportunity_i(t) * b_i

Where:

• B_legacy(t) is total borrowed capital at time t

• I_opportunity_i(t) is an indicator function (1 if opportunity i exists at time t, else 0)

• b_i is the size of the borrow tied to opportunity i

This structure produces:

• Liquidity cliffs

• Volatile interest rates

• Poor capital utilization

• Fragile lender incentives

GigaETH changes the shape of borrowing demand by tying it to payments, not speculation.

When borrowing backs real-world spending, demand becomes continuous rather than event-driven. Users maintain standing liquidity lines backed by productive ETH. Borrowing becomes a function of usage, not timing.

This can be represented as:

B_giga(t) = Σ_{u=1..U} min( L_u(t), S_u(t) )

Where:

• B_giga(t) is total borrowed capital at time t

• L_u(t) is user u’s borrowing limit derived from risk-weighted LST collateral

• S_u(t) is user u’s spend demand over time

This formulation removes spikes and replaces them with steady-state utilization.

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Velocity as the Multiplier

In payments systems, velocity matters more than notional size.

Define:

• C = total normalized ETH collateral in the system

• α = average loan-to-value ratio

• v = payment velocity (number of times borrowed liquidity turns per year)

Then total economic throughput is:

Throughput = C * α * v

Legacy DeFi implicitly assumes:

v ≈ 1

Borrow once. Deploy once. Unwind.

Payments increase v dramatically. The same borrowed liquidity can be:

• Spent daily

• Repaid incrementally

• Reborrowed automatically

This allows a single unit of collateral to support multiple economic events without liquidation or exit from yield.

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Interest and Revenue Formation

Bidder yield is derived from continuous utilization, not sporadic leverage.

Interest_earned = ∫ r(t) * B_giga(t) dt

Where:

• r(t) is the clearing interest rate determined by bidder auctions

• B_giga(t) is smooth, predictable borrowing demand

Because utilization is stable, bidders can price liquidity tighter, reducing user costs while improving system reliability.

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Code Sketch

struct Position {
    uint256 normalizedCollateral;
    uint256 riskWeight;
    uint256 borrowLimit;
    uint256 outstandingDebt;
}

function availableSpend(Position p) returns (uint256) {
    return p.borrowLimit - p.outstandingDebt;
}

function spend(Position p, uint256 amount) {
    require(amount <= availableSpend(p), "INSUFFICIENT_CAPACITY");
    p.outstandingDebt += amount;
}