Core Concepts
Pike operates on fundamental DeFi lending principles while introducing innovative features for enhanced capital efficiency and risk management. Understanding these core concepts is essential for effectively using the protocol.
Supply & Borrow
Pike allows users to supply assets to earn interest and borrow assets against supplied collateral. When you supply assets, you receive pTokens that represent your position and grow in value over time.
Key Mechanics:
Interest Accrual: Interest compounds continuously and is reflected in the increasing pToken exchange rate
Borrowing Power: The amount you can borrow depends on your collateral value and the asset's Loan-to-Value (LTV) ratio
Dynamic Rates: Interest rates adjust automatically based on market utilization
Understanding pTokens
pTokens are interest-bearing tokens you receive when supplying assets to Pike Market. They offer a simple way to track and grow your holdings over time
Represent Ownership: pTokens reflect your share of the total supplied asset pool.
Maintain Constant Balance: Your pToken balance doesn’t change.
Automatic Value Growth: The exchange rate between pTokens and underlying assets grows over time
Redeemable Anytime: You can redeem your pTokens at any time for the underlying assets plus earned interest.
Collateral Capability: Can be enabled to allow borrowing against your supplied assets
When you supply assets, you receive a fixed amount of pTokens based on the current exchange rate. Over time, interest paid by borrowers is distributed to all pToken holders, the value of your pToken will increase while the number of your pToken will remain unchanged.
Repay & Withdrawal
Effectively managing your position is crucial in DeFi. You can repay borrowed assets to reduce your debt and improve your health factor, or withdraw supplied assets when your collateral is no longer needed.
Important Considerations:
Withdrawal Limits: Assets used as collateral have withdrawal restrictions based on your borrowing position
Health Factor Impact: Both repaying and withdrawing will affect your health factor if you have an outstanding debt position
Partial Operations: You can repay or withdraw partial amounts to optimize your position
Market Liquidity: Withdrawals depend on available liquidity in the protocol
Efficiency Mode (E-mode)
Pike offers an Efficiency Mode (E-mode) that significantly enhances borrowing power when supplying and borrowing assets within the same category.
E-mode Benefits:
Higher LTV Ratios: Access increased borrowing capacity for correlated assets
Optimized Risk Parameters: Tailored liquidation LTV (LLTV) for asset categories
Capital Efficiency: Maximize the utility of your collateral within safe risk bounds
Liquidation
When a borrower's health factor falls below 1.0, their position becomes eligible for liquidation. This automated process helps maintain protocol stability and protects lenders from potential losses.
Liquidation Process:
Trigger Condition: Health factor drops below 1.0 due to collateral value decline or debt increase
Partial Liquidation: Liquidators can repay up to the Close Factor (e.g: 50%) of the debt
Liquidation Incentive: Liquidators receive a discount (e.g: 5%) on seized collateral
Liquidation Fee (Reserve Factor): A small portion of the seized collateral goes to the protocol
Oracles
Oracles play a critical role in Pike by providing accurate and up-to-date price data for supported assets. This data ensures that collateral values are correctly assessed and borrowing power is calculated reliably.
Dual-Oracle System:
Primary Oracle: Chainlink provides decentralized, high-quality price feeds
Fallback Oracle: Pyth offers additional reliability and price validation
Safety Mechanism: Transactions revert if neither oracle provides valid pricing
Primary Oracle: Chainlink
The Pike utilizes Chainlink as its primary oracle provider to deliver accurate and decentralized price feeds for supported assets. Chainlink's robust network of data providers and high reliability ensures that the protocol consistently receives up-to-date market information.
Fallback Mechanism: Pyth
To enhance the resilience of the pricing mechanism against primary oracle failure, Pike incorporates a fallback oracle system. If the primary Chainlink oracle fails to return a valid price, the protocol automatically switches to Pyth, ensuring continued functionality. Pyth sources real-time price data from high-frequency traders, exchanges, and market makers, providing an additional layer of reliability.
If neither Chainlink nor Pyth provides a valid price, the transaction is safely reverted to maintain the security and stability of the protocol.
This dual-layered oracle approach strengthens Pike’s pricing infrastructure, ensuring both reliability and safety for users.
Interest Rates
Pike utilizes a dynamic 3-slope interest rate model that adjusts borrowing and supply rates based on market utilization across three distinct phases:
Rate Phases:
Encourage Phase (0% → First Kink): Low rates to incentivize borrowing
Normal Phase (First Kink → Second Kink): Gradual rate increases for balanced conditions
Discourage Phase (Above Second Kink): Sharp rate increases to prevent liquidity shortage
This model ensures optimal capital allocation while maintaining sufficient liquidity for withdrawals.
Risk Management
The protocol implements a comprehensive risk management framework with robust collateralization, dynamic health factors and efficient liquidation mechanisms to safeguard both the protocol and its users.
Multi-Layered Protection:
Health Factor Monitoring: Real-time position safety tracking
Liquidation LTV: Asset-specific risk parameters
Supply/Borrow Caps: Market-level exposure limits
Emergency Controls: Pause mechanisms for critical situations
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