Loan Lifecycle

The Module 1 loan lifecycle follows six phases, from onboarding through repayment or liquidation.

Onboarding → Deposit → Origination → Monitoring → Repayment/Liquidation → Release

1

Phase 1: Onboarding

Before participating, all users must:

• Complete KYC/AML via a qualified custodian's CDD process

• Execute the Multi-Party GMSLA (signed once, governs all subsequent transactions)

• Be whitelisted as a Known Lender or approved Borrower in Parthenon's permissioning system

Onboarding is a one-time process. Once verified, participants can engage in unlimited transactions under the master agreement.

2

Phase 2: Collateral Deposit

Borrower deposits collateral with the Custodian — not with the protocol. The custodian:

• Confirms receipt and asset eligibility

• Encumbers the collateral under the Account Control Agreement

• Issues a reservation confirmation to TICS

• Reports initial collateral value using custodian price feeds

TICS independently verifies the collateral value via dual oracle feeds and calculates the Initial LTV.

3

Phase 3: Loan Origination

Upon collateral confirmation:

1. TICS confirms collateral adequacy (Initial LTV within parameters)

2. Platform matches lender capital from the relevant vault

3. Loan Position Token is minted on Canton Network, co-signed by Custodian

4. Lender's principal is transferred to Borrower via atomic DvP settlement

5. Interest begins accruing at the fixed Base APR

All parameters — rate, tenor, LTV thresholds — are locked at origination and encoded in the LPT.

4

Phase 4: Lifecycle Monitoring

Throughout the loan tenor, TICS continuously:

• Monitors LTV via dual oracle feeds (Chainlink + exchange TWAP)

• Reports collateral health to all relevant parties

• Calculates accrued interest at the fixed Base APR

Canton Network's sub-transaction privacy ensures that LTV data, collateral composition, and interest accrual are visible only to the Borrower, Lender, Custodian, and Platform.

5

Phase 5: Repayment / Margin Call and Liquidation

Phase 5a: Repayment (Normal Maturity)

At maturity:

1. Borrower repays Principal plus accrued interest in the Settlement Asset

2. TICS confirms receipt of full repayment

3. TICS instructs Custodian to release encumbered collateral

4. Custodian releases collateral to Borrower

5. LPT is burned on Canton Network

Early repayment is permitted without penalty unless the Term Sheet specifies otherwise. Partial repayments proportionally reduce encumbered collateral.

Phase 5b: Margin Call and Liquidation

If collateral value declines:

Margin Call (LTV ≥ 70%):

1. TICS and Custodian issue margin call notice to Borrower

2. Borrower has the Cure Period (24–72 hours) to restore LTV by depositing additional collateral or partially repaying principal

3. If cured, loan continues normally

Liquidation (LTV ≥ 85% or Cure Period expires):

1. Custodian is authorized and instructed to liquidate sufficient collateral

2. Liquidation proceeds applied to outstanding principal and accrued interest

3. Any surplus returned to Borrower

4. LPT updated or burned accordingly

Liquidation is executed by the Custodian — not by the protocol or a third-party liquidation bot. This eliminates MEV extraction and front-running risks inherent in DeFi liquidation mechanisms.

6

Phase 6: Release

Upon completion of repayment or liquidation:

• Custodian releases any remaining collateral to Borrower

• LPT is burned on Canton

• GMSLA obligations for that transaction are discharged

• Audit trail is preserved on Canton for regulatory reporting