# Introduction

## **Welcome to Zentra Finance**

## Protocol Overview

Zentra is a **decentralized money market protocol** that enables permissionless borrowing and lending of digital assets on Citrea. Built on battle-tested Aave architecture, Zentra brings institutional-grade DeFi to Bitcoin's ZK rollup ecosystem.

### How It Works

| Actor           | Action                      | Result                  |
| --------------- | --------------------------- | ----------------------- |
| **Lenders**     | Deposit assets              | Earn APY + ZNT rewards  |
| **Borrowers**   | Provide collateral + borrow | Pay interest, earn ZNT  |
| **Liquidators** | Repay underwater positions  | Earn liquidation bonus  |
| **Oracle**      | Provides real-time prices   | Powers all calculations |

**The Flow:**

1. Lenders deposit ctUSD/wcBTC into liquidity pools
2. Borrowers deposit collateral and borrow against it
3. Borrowers pay interest, which goes to lenders
4. If positions become underwater, liquidators step in

### Core Concepts

#### Supply (Lending)

Deposit assets into Zentra's liquidity pools to earn yield.

| Benefit            | Description                               |
| ------------------ | ----------------------------------------- |
| **Passive Income** | Earn interest from borrowers              |
| **ZNT Rewards**    | Additional yield from emission incentives |
| **Liquidity**      | Withdraw anytime (subject to utilization) |
| **No Lock-up**     | Your assets remain accessible             |

#### Borrow

Use deposited assets as collateral to borrow other assets.

| Feature                   | Description                          |
| ------------------------- | ------------------------------------ |
| **Over-Collateralized**   | Must deposit more than you borrow    |
| **Variable Rates**        | Interest adjusts with market demand  |
| **No Repayment Deadline** | Pay back whenever (interest accrues) |
| **ZNT Rewards**           | Often offset borrowing costs         |

#### Collateral

Your deposited assets secure your loans.

| Parameter                 | Description                                |
| ------------------------- | ------------------------------------------ |
| **Collateral Factor**     | Max % of deposit value you can borrow      |
| **Liquidation Threshold** | Health factor level triggering liquidation |
| **Liquidation Penalty**   | Fee paid if position is liquidated         |

### Key Metrics

#### Health Factor

Your position's safety level, calculated as:

```
Health Factor = (Collateral Value × Liquidation Threshold) / Borrowed Value
```

| Health Factor | Status              |
| ------------- | ------------------- |
| > 1           | ✅ Safe              |
| = 1           | ⚠️ Liquidation risk |
| < 1           | 🔴 Liquidatable     |

**Example:**

* Collateral: $10,000 wcBTC (LT: 80%)
* Borrowed: $6,000 USDC
* Health Factor: ($10,000 × 0.80) / $6,000 = **1.33 ✓ Safe**

#### Utilization Rate

Percentage of supplied assets currently borrowed.

```
Utilization = Total Borrowed / Total Supplied
```

| Utilization | Effect                                 |
| ----------- | -------------------------------------- |
| High        | Higher borrow rates, higher supply APY |
| Low         | Lower borrow rates, lower supply APY   |

### Interest Rate Model

Zentra uses a **kinked interest rate model** that adjusts based on utilization.

| Zone       | Utilization | Rate Behavior                               |
| ---------- | ----------- | ------------------------------------------- |
| **Normal** | 0% - 80%    | Gradual increase                            |
| **Kink**   | 80%         | Optimal target                              |
| **High**   | 80% - 100%  | Steep increase (discourages over-borrowing) |

### Supported Assets

#### Launch Markets

| Asset     | Type        | Use Case             |
| --------- | ----------- | -------------------- |
| **ctUSD** | Stablecoin  | Primary borrow asset |
| **wcBTC** | Wrapped BTC | Primary collateral   |
| **USDC**  | Stablecoin  | Primary borrow asset |

### Protocol Architecture

**Layer Stack:**

| Layer               | Component                                 |
| ------------------- | ----------------------------------------- |
| **Interface**       | zentra.finance (Web App)                  |
| **Smart Contracts** | Pool, Oracle, Interest Rates, Liquidation |
| **L2**              | Citrea (Bitcoin ZK Rollup)                |
| **L1**              | Bitcoin (Settlement Layer)                |

### Safety Features

| Feature                    | Description                                  |
| -------------------------- | -------------------------------------------- |
| **Over-Collateralization** | All loans backed by excess collateral        |
| **Liquidation System**     | Automatic protection against bad debt        |
| **Oracle Security**        | Multiple price feed sources                  |
| **Rate Caps**              | Maximum interest rates prevent manipulation  |
| **Reserves**               | Protocol reserves cover potential shortfalls |

#### Links <a href="#links" id="links"></a>

Zentra Finance: [https://zentra.finance](https://zentra.finance/)

Twitter: <https://x.com/ZentraFinance>

Discord:  <http://discord.gg/zentrafinance>

Medium: <https://medium.com/@zentrafinance>


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