Nero is autonomous and cutting-edge in three pillars: dynamicity, stability, and savings.

Nero protocol uses nonlinear adaptive control theory to automagically output optimal borrow rates. Furthermore, all risk parameters—base rate, close factor, LTV threshold, liquidation penalty, and others—are dynamically calculated based on the composition of your collateralized debt position.

Strictly speaking, Nero provides cross margin borrowing that also results in a better user experience as it minimises cognitive burden since you are tracking the health of fewer debt positions. 

Cross-margin borrowing allows an account to borrow against multiple assets at once, allowing its users to carefully construct hedged debt positions, or simply access leverage against their portfolio with a single CDP. 

Nero is Decentralised. If there are any lessons to be learned from this cycle it’s that there is no line regulators won’t cross. Circle was strong-armed by the OFAC into blacklisting USDC in the Tornado contracts. If it were to do the same to Maker, it would cease to exist due to its reliance on USDC.

Thus, to avoid existential threats, all collateral must be fully decentralised and immutable. If it can be censored, it is not decentralised.

Nero is Short-tail. In order to be as resilient as possible, it must minimise risk, and while Nero will eventually be able to automagically derive optimal per-asset risk parameters, short-tail assets decrease the likelihood of the protocol accruing bad debt, increasing confidence in its synthetic assets. For this reason, all assets must be deeply liquid. This property is also correlated with maturity.

Within these two characteristics, supported collateral can be:
1. ERC-20 Tokens
A normal token. This is the current status quo. A normal ERC-20 token. This can be WBTC, ETH, LINK, LUSD, and so on.
2. Yield-bearing Tokens

LTV Threshold. Nero allows you to open a credit line against a collection of crypto assets, but how is your liquidation threshold calculated? Each token has its own LTV threshold. Nero calculates the weighted average of the thresholds of the tokens that your position is comprised of in order to determine what your threshold should be.

Liquidation Penalty. Gas isn’t free, so in order to incentivise liquidators to liquidate, there must be a monetary reward. The status quo is to use a fixed penalty, typically about 10%. From a liquidator’s point of view, this is great. From a borrower’s point of view, not so much. Instead, when your position is eligible for liquidation and becomes increasingly more unhealthy, Nero will increase this penalty from the minimum up to the maximum until it becomes profitable enough for a liquidator to pick it up. The benefit of this is that it functions as an auction and guarantees the best possible experience for our users.

Nero's Close Factor. The close factor is the percentage of your debt that can be paid off by a liquidator. Nero took the same approach as with the penalty, whereby the close factor gradually increases with your LTV once it is no longer healthy.

But that’s not all. Nero was designed for scale. Nero’s dynamic close factor ensures that liquidations will occur over longer periods of time, mitigating negative feedback loops and allowing the market to recover.

Nero

An elegant hyperstructure for borrowing any asset with an on-chain source of truth against an asset or a collection of assets.

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