Lending (Markets)

The Markets module (contracts/markets/) implements Morpho-style isolated lending markets. Each market is a standalone pair of one collateral token and one loan token, with independent risk parameters.

Architecture

Unlike monolithic lending pools (Aave, Compound), each market is isolated. A bad collateral asset only affects that specific market, not the entire protocol.

Contract	Import	Purpose
Markets	`@luxfi/contracts/markets/Markets.sol`	Core lending engine
Allocator	`@luxfi/contracts/markets/Allocator.sol`	Capital allocation
Router	`@luxfi/contracts/markets/Router.sol`	User-facing router

Market Parameters

Each market is defined by:

Parameter	Description
`loanToken`	Token being borrowed
`collateralToken`	Token used as collateral
`oracle`	Price oracle for the pair
`irm`	Interest rate model
`lltv`	Liquidation loan-to-value ratio

Usage

import "@luxfi/contracts/markets/Markets.sol";

Markets markets = Markets(MARKETS_ADDRESS);

// Supply collateral
markets.supplyCollateral(marketId, amount, onBehalf, data);

// Borrow against collateral
markets.borrow(marketId, amount, onBehalf, receiver);

// Repay loan
markets.repay(marketId, amount, onBehalf, data);

// Withdraw collateral
markets.withdrawCollateral(marketId, amount, onBehalf, receiver);

Liquidation

When a position's LTV exceeds the market's lltv, anyone can liquidate:

// Liquidate an unhealthy position
markets.liquidate(
    marketId,
    borrower,
    seizedAssets,  // collateral to seize
    repaidShares,  // debt shares to repay
    data
);

The liquidation incentive is determined by the market's LLTV -- higher LLTV markets offer larger liquidation bonuses to compensate for the tighter margin.

Interest Rate Model

Interest rates adjust dynamically based on utilization:

Utilization	Rate Behavior
Below target	Rate decreases slowly
At target	Rate is stable
Above target	Rate increases rapidly

The target utilization is typically 90%, ensuring sufficient liquidity for withdrawals while maximizing capital efficiency.

Oracle Integration

Markets use the unified Lux Oracle (contracts/oracle/Oracle.sol) which aggregates prices from Chainlink, Pyth, TWAP, and the DEX precompile. Each market specifies its oracle at creation time.

import "@luxfi/contracts/oracle/IOracle.sol";

// Oracle returns price with 18 decimal precision
(uint256 price, uint256 timestamp) = oracle.getPrice(collateralToken);

Key Properties

Permissionless: Anyone can create a market with any token pair
Isolated risk: Each market has independent solvency
Gas efficient: Single contract manages all markets (no factory pattern)
Flash loans: Built-in flash loan support for arbitrage and liquidation