Merlin Hub and BTC Hub

Mage Protocol applies a market design known as the hub-and-spoke model, enhancing efficiency and security in lending markets. This innovative approach diverges from traditional single cross-collateral pool systems commonly found in DeFi protocols.

Within the Mage ecosystem, Merlin Hub and BTC Hub represent specialized lending markets, each dedicated to supporting distinct ecosystems, with tailored Loan-To-Value ratios and optimal capital utilization strategies to support each ecosystem's growth.

Key Features

• Risk Management: Isolated pools significantly mitigate the risk of draining the total value locked (TVL) in a single attack, a vulnerability common in single cross-collateral pools.

• Asset Listing: This approach allows Mage to diversify asset listings without increasing the risk exposure of the entire protocol’s TVL.

• Inter-Pool Transactions: To overcome the limitation of collateralizing and borrowing across different isolated pools, mBTC is introduced as a common currency, facilitating seamless transactions across all isolated pools in Merlin Hub and BTC Hub.

• Customizable Parameters: Isolated pools offer adjustable reserve factors and liquidation thresholds, providing users with higher loan-to-value (LTV) ratios, greater leverage, and the potential for higher APYs.

Advantages Over Traditional Models

• Isolated pool structure significantly reduces systemic risks compared to single cross-collateral pools.

• Support for Native Projects: Tailored to strengthen the Merlin and border Bitcoin ecosystem, enhancing native project tokens with improved utility, capital efficiency, and liquidity.

• Market Growth: It plays a pivotal role in transforming the Merlin ecosystem into a more dynamic and robust market.

Aspect	Single Cross-collateral Pool	Isolated Pools
Structure	All assets stored in single pool, users can deposit supported assets to earn interest or borrow.	Pools run in segregated environments, each with set of supported assets and parameters
Security	In case of irregular price movements or malicious acts, the entire TVL will be at risk.	Risks or price irregularities are contained in each isolated pools, affecting a smaller amount of asset
Customizability	Lack of customizability on money market parameters.	Each different pool contains different assets and lending parameters. Users can invest according to their risk appetite.
Asset Availability	Listings only include blue chip tokens with deep liquidity.	Isolated pools could hold more volatile tokens and expand offerings to users.