Tunable Pool Depth and Reserve Lending

One pool migration, two uses of liquidity

This upgrade gives subnet pools a tunable price response and puts balances outside their trading range to work as lending inventory. Existing pools move to a translated ellipse while keeping their opening prices. The initial calibration targets at least a 1% fall in ending spot price for a sale of alpha worth 500 TAO at that opening price, excluding fees. Pools already sufficiently sensitive keep their baseline response.

The target holds at calibration; parameters stay fixed between explicit changes. Pools unable to execute the full reference trade retain a safe baseline and report that limitation. The ellipse has finite buy and sell endpoints, so complete swaps must fit its remaining range and any caller price limits.

The migration transfers globally unreachable alpha and TAO balances into separate vaults. It adjusts the ellipse centers by the same amounts, preserving the calibrated swap quotes. The assets can be extracted independently, without paired liquidity withdrawal or token creation. Borrowing is enabled only after the complete migration succeeds; an incomplete migration leaves it disabled. Governance can pause new loans without disabling repayments.

Fixed principal, collateral coupons

A short posts TAO collateral, borrows alpha and sells it through the AMM. The resulting TAO remains locked. Closing buys back the original alpha debt, or the owner supplies that alpha from the saved hotkey, and returns the remaining TAO. A long posts existing alpha collateral and receives freely transferable TAO. Closing repays the original TAO debt and returns the remaining alpha.

• 25% initial LTV. Historical lending prices and complete, fee-inclusive swap quotes bound each opening; vault inventory must fund it. Shorts also require the caller’s minimum net TAO proceeds.
• 100% nominal annual interest on opening loan value. Coupons are fixed in collateral units, accrue per block and are collected weekly. A 250-TAO opening loan pays about 4.79 TAO per seven days, not 1,000 TAO annually merely because it has 1,000 TAO collateral. There is no additional opening or closing fee.
• Both short and long coupons burn TAO. Short coupons move to the reserve account and then directly to the canonical inaccessible TAO burn address, without an AMM swap or mature price reference. Long coupons sell alpha for TAO only when the full fee-inclusive quote returns at least 98% of the mature lending EMA’s fair output after fees and price impact. Bounded chunking permits smaller acceptable sales. Each sale atomically burns exactly the TAO received; a failed sale or burn retains the backed pending coupon. Favorable prices remain allowed.
• No price-triggered liquidation. Collateral exhaustion forfeits the position and retains assets still held in custody. Unrecovered principal is recorded as a loss. The mechanism accepts credit losses.
• 10% aggregate borrowing cap per asset. The denominator is available vault inventory plus outstanding principal, excluding AMM reserves, borrower collateral, locked proceeds and pending interest. Interest burns do not replenish inventory or enlarge the cap; principal repayments replenish the original borrowed asset.

The canonical burn transfers TAO to its inaccessible burn address while both the currency and Subtensor total-issuance counters stay unchanged. Tiny amounts that cannot be credited remain an explicit recycling exception, recorded as DustForfeited.

Debt never falls merely because interest was collected. Each coldkey can hold one position per subnet. The lending reference is a dedicated geometric EMA with a 24-hour half-life, fixed before the current block's trades and updated with clipped observations. This limits abrupt valuation changes without claiming that manipulation is impossible.

V1 bounds processing to 256 funded subnet vaults, 256 open positions across the chain and 128 per subnet. When vault capacity is full, additional pools keep their reserves in the AMM until a retired subnet vault frees a slot for automatic admission. Borrowers must close before changing their own keys. Nominated positions follow actual validator hotkey stake migrations.

Subnet deregistration

Deregistration freezes interest. Existing beta-basket holdings convert to funded root cash first; endpoint-blocked holdings receive funded redemption into their original fund. Lending positions settle without AMM swaps. Pending TAO coupons are burned before remaining reserve inventory enters the funded dissolution pot. Pending alpha coupons stay ordinary vault stake through global settlement; only their actual funded TAO redemption receipts are burned. Unfunded alpha produces no TAO burn. Longs accumulate their escrow's actual TAO redemptions, then settle once after all payouts: debt is recovered, any surplus is returned and any shortfall is recorded. TAO transferred elsewhere is not assumed to remain in custody. Tiny refunds that cannot recreate a reaped account are explicitly recycled and recorded as DustForfeited. Cleanup finishes before the subnet identifier can be reused.

Three CLI commands

btcli lending open --netuid 64 --side short --collateral 1000 -w mywallet
btcli lending close --netuid 64 -w mywallet
btcli lending list --netuid 64

Use the SDK shipped with the lending runtime. Open and close take full runtime quotes and default to a 1% margin on caller protections. Failed quotes stop submission, and failed bounds roll back the complete transaction. The pool lending guide explains long collateral, direct alpha repayment, reserve accounting and settlement in detail.