ZIP-107: Impact Lending Protocol

Abstract

This ZIP defines an overcollateralized lending protocol where borrowers who post conservation-linked collateral (conservation bonds, impact attestations, carbon credits) receive reduced collateral requirements and preferential interest rates. The protocol uses a dual-rate model: a base rate determined by utilization and an impact discount proportional to the verified conservation value of the borrower's collateral portfolio. Lenders earn yield from borrower interest, with a protocol-level conservation reserve funded by a fraction of liquidation penalties.

Motivation

Traditional DeFi lending treats all collateral as purely financial. The Zoo ecosystem holds substantial conservation-linked value in the form of ZIP-101 bonds, ZIP-102 vault shares, ZIP-105 carbon credits, and ZRC-721 wildlife NFTs. A lending protocol that recognizes this value creates a positive feedback loop:

Conservation premium: Users are incentivized to hold conservation assets because they unlock cheaper borrowing, increasing demand for impact tokens.
Capital efficiency: Conservation bond holders can borrow against their locked principal without breaking the bond term, improving capital efficiency.
Liquidation buffer: Conservation assets tend to have lower volatility than speculative tokens, reducing systemic liquidation risk.
Treasury growth: The conservation reserve accumulates from liquidation events, providing countercyclical funding during market downturns when conservation programs need it most.

Specification

1. Collateral Tiers

Tier	Assets	Base LTV	Impact Discount	Max LTV
Standard	ZOO, ZUSD, WZOO	75%	0%	75%
Conservation	ZIP-101 bonds, ZIP-102 vault shares	75%	+5%	80%
Carbon	ZIP-105 carbon credits	70%	+7%	77%
Wildlife NFT	ZRC-721 (floor price oracle)	50%	+5%	55%

Impact discount is applied additively to the base loan-to-value ratio for verified conservation collateral.

2. Interest Rate Model

// SPDX-License-Identifier: CC0-1.0
pragma solidity ^0.8.20;

contract ImpactInterestModel {
    uint256 public constant BASE_RATE = 2e16;        // 2% base annual rate
    uint256 public constant SLOPE_1 = 4e16;           // 4% slope below kink
    uint256 public constant SLOPE_2 = 75e16;          // 75% slope above kink
    uint256 public constant KINK = 80e16;             // 80% utilization kink
    uint256 public constant MAX_IMPACT_DISCOUNT = 30; // 30% max rate reduction

    function getBorrowRate(
        uint256 utilization,
        uint256 impactScore       // 0-100, based on conservation collateral %
    ) external pure returns (uint256 rate) {
        if (utilization <= KINK) {
            rate = BASE_RATE + (SLOPE_1 * utilization) / 1e18;
        } else {
            rate = BASE_RATE + (SLOPE_1 * KINK) / 1e18
                 + (SLOPE_2 * (utilization - KINK)) / 1e18;
        }

        // Apply impact discount
        uint256 discount = (rate * impactScore * MAX_IMPACT_DISCOUNT) / (100 * 100);
        rate = rate - discount;
    }
}

3. Core Lending Pool

contract ImpactLendingPool {
    struct Market {
        address asset;
        uint256 totalDeposits;
        uint256 totalBorrows;
        uint256 reserveFactor;          // Fraction to protocol reserve
        uint256 conservationReserveBps; // Fraction of reserve to conservation
        address conservationDAO;
    }

    struct Position {
        mapping(address => uint256) collateral;
        uint256 borrowed;
        uint256 impactScore;
    }

    mapping(address => Market) public markets;
    mapping(address => Position) public positions;

    event Borrowed(address indexed user, uint256 amount, uint256 impactScore, uint256 rate);
    event ConservationReserveFunded(address indexed dao, uint256 amount);

    function deposit(address asset, uint256 amount) external {
        // Standard deposit into lending pool
        markets[asset].totalDeposits += amount;
        IERC20(asset).transferFrom(msg.sender, address(this), amount);
    }

    function borrow(address asset, uint256 amount) external {
        Position storage pos = positions[msg.sender];
        uint256 impactScore = _calculateImpactScore(msg.sender);
        pos.impactScore = impactScore;

        uint256 maxBorrow = _maxBorrowable(msg.sender, impactScore);
        require(pos.borrowed + amount <= maxBorrow, "EXCEEDS_LTV");

        pos.borrowed += amount;
        markets[asset].totalBorrows += amount;
        IERC20(asset).transfer(msg.sender, amount);

        emit Borrowed(msg.sender, amount, impactScore, _currentRate(asset, impactScore));
    }

    function _calculateImpactScore(address user) internal view returns (uint256) {
        // Score 0-100 based on fraction of collateral that is conservation-linked
        // Conservation bonds, carbon credits, and wildlife NFTs contribute
        // Score = (conservation_collateral_value / total_collateral_value) * 100
        return 0; // Placeholder
    }
}

4. Liquidation and Conservation Reserve

When a position is liquidated:

Liquidator receives collateral at a discount (standard 5% bonus).
A liquidation penalty (3% of collateral) is split:
- 60% to the lending pool reserve (protocol solvency).
- 40% to the conservation reserve, forwarded to the pool's conservationDAO.

This ensures conservation funding is countercyclical -- liquidation events that typically signal market stress also generate conservation capital.

5. Oracle Requirements

Collateral Type	Oracle Source	Update Frequency
ZOO, ZUSD	Zoo AMM TWAP (ZIP-106)	Every block
Conservation bonds	Bond face value + accrued yield	Hourly
Carbon credits	ZIP-105 DEX TWAP	Every block
ZRC-721 NFTs	Floor price oracle (ZIP-200)	15 minutes

Rationale

Why impact-weighted rates? Flat rates ignore the risk-reduction and positive externality of conservation collateral. Impact weighting creates a market signal that conservation assets are systemically valuable, not just speculative.

Why a 30% maximum discount? The cap prevents over-subsidization. Even with maximum conservation collateral, borrowers still pay meaningful interest to compensate lenders.

Why countercyclical conservation funding? Market downturns are precisely when conservation programs face funding cuts. Drawing from liquidation penalties provides automatic stabilization.

Security Considerations

Bad Debt

Conservation collateral with illiquid secondary markets (NFTs, long-term bonds) may be difficult to liquidate. The protocol should maintain a buffer reserve and restrict NFT collateral to pools with sufficient liquidity depth.

Impact Score Manipulation

The impact score is computed from on-chain collateral composition. Flash-loan attacks that temporarily inflate conservation collateral are mitigated by requiring collateral to be deposited for a minimum duration (1 epoch / 7 days) before impacting the score.

Oracle Failure

If any oracle feed fails, the affected collateral type is automatically assigned LTV = 0 until the oracle resumes, preventing borrowing against stale prices.

Cascading Liquidations

A sharp decline in conservation asset prices could trigger cascading liquidations. Circuit breakers pause liquidations if more than 20% of total collateral is liquidated within a single epoch.

Impact Lending Protocol