> For the complete documentation index, see [llms.txt](https://crunch-network.gitbook.io/crunch-network-lite-paper/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://crunch-network.gitbook.io/crunch-network-lite-paper/implementation-and-architecture.md).

# Implementation and Architecture

Here's what happens under the hood.

### Ledger

At its core, the Crunch Network is a ledger that allows Polygon accounts to supply or borrow assets while computing interest as a function of time.

The ledger is implemented using smart contracts on the Ethereum blockchain and is publicly accessible and free to use for machines, dApps, and humans.

### Liquidity Incentive Structure

The Crunch Network relies on a unique interest rate model to incentivize liquidity rather than guaranteeing it. 

When there is a high demand for an asset, the liquidity of the protocol (the tokens available to withdraw or borrow) will decline, causing interest rates to rise and incentivizing supply while disincentivizing borrowing.

### Supplying Assets

Unlike traditional lending platforms where users' assets are matched and lent to another user, the Crunch Network aggregates the supply of each user.

When a user supplies an asset, it becomes a fungible resource that offers significantly more liquidity than direct lending.

### Borrowing Assets

The Crunch Network allows users to frictionlessly borrow from the protocol using any token as collateral for use anywhere in the Polygon ecosystem.

### Liquidation

When price fluctuations occur, a borrower's position might be liquidated if their collateral value falls below a certain threshold (known as the liquidation ratio). 

A liquidation event happens when the price of collateral drops below this threshold.

### Governance

The Crunch Network is governed by its community through decentralized decision-making processes such as voting on proposals and participating in discussions on governance forums.

In essence, Crunch Network's smart contract-based infrastructure ensures transparency, security, and flexibility while also enabling community-driven governance processes that ensure its long-term sustainability and growth.