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What are Isolated Lending Markets?

HypurrFi’s Isolated Lending Markets are specialized lending platforms that provide markets between a pair of ERC-20 assets.

Each pair exists as an isolated market, allowing users to participate in lending and borrowing activities with specific asset pairs while limiting exposure to other markets.

These markets are directly forked from the Fraxlend contracts and have been carefully adapted to operate within the Hyperliquid EVM environment.

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How Isolated Markets Work

In an isolated lending market:

  • Each market operates independently from others
  • Risk is contained to specific asset pairs
  • Collateral in one market cannot affect or be affected by other markets
  • Custom parameters can be set for each pair based on their unique risk profiles

This isolation provides greater security by preventing contagion between different asset markets, particularly important for newer or more volatile assets.

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Key Participants

The primary participants in HypurrFi’s Isolated Lending Markets are:

  • Lenders who provide Asset Tokens to the pair in exchange for hyTokens (HypurrFi’s yield-bearing receipt tokens)
  • Borrowers who provide Collateral Tokens to the pair and receive Asset Tokens in return, incurring interest payments that are paid to lenders upon redemption of hyTokens

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Core Components

Beyond the markets themselves, the ecosystem includes:

  • Oracles: Each pair relies on price oracles to determine the market rate for both the Asset Token and the Collateral Token, providing robust and manipulation-resistant price feeds
  • Rate Calculators: These calculate interest rates based on the amount of capital available to borrow, typically with lower rates when less is borrowed and higher rates when utilization increases
  • Registry: Tracks all isolated lending market pairs deployed on HypurrFi

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Advantages of Isolated Lending Markets

  • Risk Containment: Issues in one market don’t affect others
  • Asset-Specific Parameters: LTV ratios and liquidation thresholds can be customized for each asset pair
  • Specialized Markets: Allows for markets between specific asset pairs that might not be viable in a shared pool model
  • Simplified Risk Assessment: Users can more easily understand the risk of participating in a specific isolated market

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Liquidations in Isolated Markets

Each isolated market maintains its own liquidation thresholds. The protocol operates liquidation mechanisms that can be triggered when positions become unhealthy.