Skip to main content

Lending

Lending in Alto revolves around a single stablecoin, DUSD, and takes place within isolated markets that are independent from one another in terms of collateral, parameters, and risk. Each market enables users to transform deposited assets into productive capital by supplying, borrowing, or minting DUSD in different ways. This design reduces systemic risk, simplifies accounting, and makes capital flows predictable across the protocol.

Market Types​

Alto supports two types of lending environments, both centered around DUSD:

  • Borrow Markets: In these markets, users supply DUSD to a liquidity pool and earn interest from borrowers. Other users deposit collateral and borrow DUSD from the pool, paying variable interest determined by supply and demand.
  • Mint Markets: These markets allow users to create new DUSD directly by locking collateral. Each market has a predefined debt ceiling that caps the total amount of DUSD that can be minted. Interest payments from minted positions flow to ALTO stakers, linking protocol usage to governance participation.

The use of a single stablecoin across both types of markets simplifies the user experience and creates a unified layer of credit and liquidity throughout the protocol.

Core Mechanics​

Supplying and Borrowing​

Users can supply DUSD to Borrow Markets to earn yield, or deposit supported collateral (such as ETH, liquid staking tokens, or yield-bearing assets) to borrow DUSD against it. Interest rates are determined algorithmically based on the utilization of the pool. Borrowers are required to maintain a loan-to-value (LTV) ratio below the market’s maximum threshold, which is defined by the quality and risk profile of the collateral.

Minting DUSD​

In Mint Markets, users open debt positions by minting new DUSD directly against their collateral, rather than borrowing from an existing liquidity pool. Each market’s debt ceiling limits the total amount of DUSD that can be created, and positions accrue interest while they remain open. Because this debt represents newly issued DUSD, interest collected in these markets is directed to ALTO stakers instead of liquidity providers.

Yield and Capital Efficiency​

Many markets accept yield-bearing collateral or integrate with external strategies, allowing assets to continue generating returns while serving as loan backing. Alto also supports Leverage, a mechanism that enables a position to be opened at a target leverage multiplier in a single transaction. This improves capital efficiency and simplifies position management by removing the need for repeated manual deposits and borrows.

Liquidation and Risk Management​

Risk in Alto is managed at the market level, meaning each market operates independently with its own parameters and oracles. If a position’s LTV exceeds its liquidation threshold, it becomes subject to liquidation. Alto uses a partial liquidation model that minimizes user losses while preserving protocol solvency.

  • Dynamic Close Factor (DCF): Determines how much collateral needs to be sold to bring a position back below the maximum LTV. The closer a position is to the liquidation threshold, the smaller the portion liquidated.
  • Dynamic Liquidator Bonus (DLB): Rewards liquidators with a variable bonus for acting promptly. The bonus decreases as a position becomes safer, creating strong incentives for timely liquidations.

This model avoids full position wipeouts in most cases, protects users from unnecessary losses, and improves market stability by smoothing liquidation activity.

Opening Fees and Interest Flows​

Borrowing or minting DUSD incurs an opening fee, which is collected when a new position is created. The opening fee is always routed to ALTO stakers, while ongoing interest payments are distributed to lenders in Borrow Markets and to stakers in Mint Markets. This consistent fee structure aligns incentives across markets while preserving clear distinctions between supplier yield and protocol revenue.

Summary: Alto’s lending layer provides a unified environment for borrowing and minting a single stablecoin, DUSD, across isolated markets with independent risk parameters. Partial liquidations, dynamic incentives, and flexible collateral support make the system capital-efficient while maintaining robust risk controls.