Trilobyte has multiple layers of protection to manage risk and protect investors when borrowers fail to repay.
Risk Layers
Layer 1: Late Fees → Financial penalty for overdue payments
Layer 2: Grace Period → Time buffer before default
Layer 3: Manager Collateral → Skin in the game — slashed on default
Layer 4: Delinquency Tracking → Blocks risky managers from new vaults
Layer 5: Renegotiation → Restructure terms to avoid default
Layer 6: Credit Limits → Cap manager exposure
Late Fees
When a payment is overdue (now > next_due), the Pool Manager can apply a late fee:
Rate: 18% per annum, calculated monthly
Effect: Increments missed payment counter, advances next due date
Purpose: Financial penalty that signals vault distress
Grace Period
Every vault has a configurable grace period (default: 30 days). This is the window between a missed payment due date and when default can be triggered.
During the grace period, the borrower can still make payments to prevent default
The manager can apply late fees and attempt to resolve the situation
After the grace period expires, anyone can call check_default() to trigger default
Default Trigger
Default is triggered by calling check_default() when:
The vault is in the Active phase
The current time exceeds next_due + grace_period
Default is permissionless — anyone can trigger it. This prevents managers from colluding with borrowers to avoid consequences.
Consequences of Default
When default is triggered:
Action
Detail
Phase transition
Vault moves to Defaulted
Collateral slashed
Manager's locked collateral is seized for investor recovery
Delinquency flag
Manager is marked delinquent in Globals
Outstanding decremented
Manager's outstanding principal is reduced in Globals
Events emitted
VaultDefaulted, ManagerMarkedDelinquent
Manager Collateral
Pool Managers must deposit collateral before creating vaults. This is their "skin in the game":
Deposit: deposit_collateral(manager, token, amount) — stake tokens in Globals
Lock: When a vault is created via the Factory, collateral is locked proportional to the principal
Release: On FullyRepaid, the locked collateral is released
Slash: On Defaulted, the locked collateral is slashed and transferred for investor recovery
The collateral ratio is a global setting that determines what percentage of the principal must be covered by collateral.
Delinquency Tracking
Managers with defaulted vaults are flagged as delinquent:
The Factory checks is_delinquent(manager) before allowing vault creation
Delinquent managers are blocked from creating new vaults
Only an Operations Admin can clear delinquency via clear_delinquency(caller, manager) after review
A delinquency_count tracks the total number of defaults per manager
Credit Limits
Each Pool Manager has a maximum credit limit (max_credit) set by the Operations Admin:
The Factory checks outstanding_principal + new_principal ≤ max_credit before deployment
Prevents a single manager from over-leveraging the protocol
Can be adjusted via set_manager_credit_limit(caller, manager, max_credit)
Renegotiation as Recovery
Even after default, a vault can be restructured:
The manager can propose renegotiation from the Defaulted phase
If approved, the vault returns to Active with new terms and a recalculated EMI
This provides a path to recovery when the borrower's situation can be salvaged
Trilobyte's risk model is inspired by traditional structured finance, where first-loss capital (manager collateral), credit limits, and workout procedures (renegotiation) work together to protect senior investors.
