More about the PCVR & CTs

When a user takes out a loan in Zeru, a portion of their interest payments will accrue to the Protocol Controlled Value Reserve [PCVR]. As such, over time the PCVR will grow into a sizeable and diverse pool of different assets. When a user makes loan repayments, they are entitled to mint Credit Tokens [CTs] which are a type of SoulBound Token [SBT] that represents some or all of their contribution to the PCVR.

A higher ZScore results in a higher CT mint percentage, which can approach but never exceed 100% of the user’s PCVR contributions. As a user accrues CTs, the tokens can then be in turn used to take out a ZCL. Similar to minting, a higher ZScore will result in a higher ZCL issuance percentage, which can approach but never exceed 100% of the user’s CT balance.

The PCVR plays an important role for Zeru too. If a user defaults on loan repayments, in addition to that user’s ZScore being decreased, the users’ CTs will also be penalised. This means that the Zeru protocol will always be protected even in the case of mass defaults.