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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.