The refundable deposit on LP loans

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Kadia Lending is in development, not audited and not on mainnet. A test version of the ERG market runs on Ergo testnet (the testnet record). The contracts aren’t final. Every figure marked as a launch parameter comes from the economic model (EM §3), is illustrative until it’s re-frozen before deployment, and can change.

Source: kadia-lending docs/specs/economic-model.md (EM) and docs/specs/lending-design.md (LD) at commit 2bb9256 (2bb92562799019fab6ac95b2576ad94197b6b14f).

Every loan in the LP market holds at least 1.2 ERG of your own ERG in its loan box, as a refundable deposit (LD §5, D41).

Why it exists

Ergo charges storage rent on boxes left untouched for about four years. A loan box in the LP market holds LP tokens as collateral, and LP tokens can’t pay rent in ERG. The deposit covers two rent periods for a box of up to 480 bytes, so the loan box always pays its own rent.

In the ERG market, the collateral is ERG, which pays its own rent, so those loans need no deposit.

What it is, and isn’t

• It’s yours. You send it when you open the loan. The review screen shows it as “Refundable deposit: 1.2 ERG”, marked “stays yours”.
• It isn’t collateral. It doesn’t count toward your loan’s value or your loan-to-value.
• It isn’t a fee. Nobody earns it.

When it comes back

Event	The deposit
You close the loan: repay everything	Comes back to you with your LP tokens
A liquidation closes the loan	Comes back to you
A partial liquidation (the loan stays open)	Stays in the open loan until it’s later closed

It always returns to the loan’s owner address, never to a keep address or to whoever repaid (LD §5, D36, D41, D43).