What is Twyne

Twyne is a noncustodial, risk-modular credit delegation protocol implemented for the Ethereum Virtual Machine. The protocol is engineered as an immutable smart contract on top of existing lending markets and serves as a trustless supplementary layer for lenders, borrowers, and applications.

Twyne allows lenders (referred to as Credit LPs) across established lending markets to selectively take on higher risk in exchange for higher yields by delegating their idle credit power to eager borrowers.
Conversely, Twyne allows borrowers who want more leverage or a bigger liquidation buffer to boost their effective Loan-to-Value (LTV) by leveraging other lenders’ unused borrowing capacity.
By unlocking new use cases for dormant deposits, Twyne directly improves capital efficiency and contributes to higher utilization rates for all lending markets integrated through the protocol — while insulating them from additional risk.

For more details, dive into the Twyne [Litepaper] or join the community [Telegram channel].

Why Twyne

Depositing assets into a lending market gives users both passive lending yield and borrowing power.

[FIGURE PLACEHOLDER]

Most DeFi lenders supply liquidity without using their borrowing capacity. As a result, over 60% of all assets in DeFi are sitting idle.
This mountain of dormant capital leads to low utilization rates, which in turn hurts everyone’s APY.

At the same time, there’s a cohort of eager borrowers who want to borrow more than they’re currently allowed, using the extra funds either as an added liquidation buffer or to boost their looping strategies.

Lenders (Credit LPs) and eager borrowers could agree to share the borrowing power for a fee, spawning a secondary market that bypasses the underlying lending protocol’s risk parameters.
This isolated setup allows lending markets to remain secure while letting users benefit from a segregated risk layer.

(For Twyne V1, the assets provided by Credit LPs are identical in type to those provided by the borrower as collateral, ensuring that only one type of LLTV needs to be tracked.)

[FIGURE PLACEHOLDER]

Twyne creates a two-sided marketplace for delegating borrow capacity on top of existing lending markets, reanimating a huge pool of idle liquidity across DeFi.
Underlying protocols gain capital efficiency and higher utilization rates, lenders enjoy higher APYs, and borrowers can safeguard their positions or optimize their leverage strategies.

How It Works

To use Twyne, both lenders and borrowers start by depositing IOU tokens from the underlying lending market (e.g., euler_USDC).
From there, users can choose whether they want to engage with Twyne as:

• A lender (Credit LP)
• A borrower
• A combination of both

Here are the 3 possible user scenarios with their steps:

1. Delegate Your Borrowing Power (Credit LP)

• Deposit euler_USDC into Twyne’s Credit Vault.
• Forgo your borrowing power and instead underwrite other users’ loans.
• Receive a new receipt token: twyne_euler_USDC, which earns delegation yield.

2. Combination of Delegating and Borrowing

• Split your euler_USDC between:
  • The Credit Vault (to delegate and earn yield), and
  • The Collateral Vault (to borrow for yourself)
• This reduces personal borrowing power but increases yield through delegation.

3. Borrow Beyond What Euler Allows (Boosted Borrowing)

• Deposit euler_USDC into Twyne’s Collateral Vault.
• Reserve additional credit from the Credit Vault (borrowing power delegated by others).
• This reserved credit is temporarily added to your Collateral Vault.
• You can now borrow more from Euler than normally allowed.

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Lenders on Twyne receive the new receipt token twyne_euler_USDC, which earns them delegation yield (termed CLP Supply Rate), denominated in the same asset as their initial deposit.
This acts as an orthogonal income stream, boosting the lender’s overall returns from lending markets to:
Supply APY (underlying lending market) + CLP Supply Rate (Twyne).