Introduction to Teller

What is Teller?

Teller is a non-custodial lending book that enables time-based loans. The protocol supports any ERC20 (token) or ERC721 / ERC1155 (NFT) as collateral, with no margin liquidations for the duration of a loan. Teller is live on Ethereum, Base, Arbitrum, and Polygon.

Teller’s core value propositions

• Time-based loans, collateralized by any token

• No margin call liquidations. Loan repaid, collateral returned

• Liquidity terms set by lenders or smart contract pools, fully customizable

• Loan extensions via flash loans, to roll current loans into new loans

Why Teller?

Digital assets are the primary driver of blockchain adoption. From BTC and ETH, to DAO shares, LP deposits, derivatives, NFTs, real-world assets, and more, digital assets are core to crypto. To date, however, DeFi money markets support only a limited number of digital assets as collateral. These protocols minimize the risk of price manipulation, and the subsequent potential loss of liquidity provider capital, at the constraint of capital efficiency for digital asset holders.

The Teller protocol brings forth a traditional loan design to DeFi, by replacing price-based liquidation pools with fixed collateral, fixed duration loans in concentrated liquidity order-books. This, in turn, enables borrowers to leverage any digital asset as collateral, without price-based liquidation risk. Furthermore, liquidity providers can customize loan terms, such as collateral, duration, and yield, with deterministic lending offers.

Comparatives to DeFi money markets

• Value: any crypto asset can be used as collateral (vs limited collateral selection)

• Risk: collateral price volatility risk for LP (vs oracle manipulation risk for LP)

• Underwriting: collateral price volatility (vs liquidation certainty)

• Default recourse: collateral seizure (vs price liquidation)

How to earn yield on Teller?

Liquidity providers can earn passive income by directly lending to individual loan requests or supplying liquidity through an open “offer” with deterministic requirements on collateral, duration, and yield.

How to borrow on Teller?

Borrowers are able to leverage any crypto asset as collateral, both ERC20’s (tokens) and ERC721’s / ERC1155’s (NFTs), by requesting a custom loan or by borrowing from open liquidity “offers” based on deterministic requirements of collateral, duration, and yield.

How do loans on Teller work?

Loans on Teller can be constructed in an over-collateralized, under-collateralized, or no-collateral fashion, with a fixed duration, fixed APR, and no risk of collateral liquidation for the duration of a loan. Loans can be “offered” by liquidity providers, based on pre-set conditions, and “taken” by the borrower deterministically if the wallet meets the onchain criteria. In addition, loans can be “offered” by a borrower, who submits a custom loan request, and “taken” by a liquidity provider, who funds the loan.

When is a loan considered in default?

The protocol defines default as failing to pay a scheduled repayment after a pre-determined due date plus a grace period. The repayment schedule per loan is based on the loan type, either standard (principal + interest) or ballon (interest only), with the remaining amount due by the end of the loan duration. The grace period is set by the specific lending pool.

What happens in the case of default?

In the case of default, a liquidator can repay the loan on the borrower’s behalf and seize any collateral associated with the loan. In addition, the lender can close the loan without repayment by seizing the remaining collateral.

What are the risks?

No protocol is without risks. The primary liquidity risk associated with lending on Teller is loan repayment. Liquidity providers must account for the probability of loan repayment (and/or collateral price stability) based on the loan collateral (both type and amount).

The primary borrowing risk is default recourse. On default, collateral assets can be seized by a liquidator, regardless of asset type and amount.

Teller's smart contracts are open source and can be found in the public Github repository Teller V2. In addition, a public audit by Sherlock can be found in Github at Sherlock audit - Teller.