Collateral & Real-World Assets

Trilobyte loans can be backed by two complementary forms of collateral. Both protect investors — and together they let the protocol serve a wide range of credit, from pure cash-flow lending to asset-backed lending against tokenized real-world assets.

Manager collateral (skin-in-the-game)

Every loan is backed by the Pool Manager's own staked capital. When a manager originates a loan, a portion of their staked collateral (a percentage of the principal, set by the protocol's collateral ratio) is locked for the life of the loan.

• If the loan is repaid, the collateral is released back to the manager.

• If the loan defaults, the collateral is slashed to compensate investors — it is first-loss capital.

This aligns the underwriter's incentives directly with investors': the manager loses their own money before investors do. (See For Pool Managers.)

Borrower collateral (real-world assets)

A loan can additionally require the borrower to pledge an asset as collateral — including a tokenized real-world asset. The pledge is held in a dedicated on-chain escrow for the life of the loan:

1. Pledge — before disbursement, the borrower locks the asset in escrow, naming the vault as its controller.

2. Verify — at disbursement, the vault checks the pledge (asset, amount, and recovery party) against the loan's terms before releasing any funds.

3. Release or seize — when the loan is fully repaid, the asset is released back to the borrower; if the loan defaults, it is seized and transferred to the designated recovery party.

This is what lets Trilobyte extend beyond cash-flow lending into asset-backed credit: any asset that can be represented as an on-chain token — invoices, receivables, or tokenized real-world assets — can serve as collateral, with the protocol enforcing custody and recovery automatically.

A loan can use manager collateral alone (cash-flow underwriting), or manager collateral plus a borrower's pledged asset (asset-backed). The borrower-collateral parameters — the escrow contract, collateral token, minimum amount, and recovery party — are set per vault at creation. The on-chain custody is handled by a dedicated escrow contract (see the Collateral Escrow Contract for the mechanics).