How Does Joule Finance Work?

Isolated lending positions where each borrowing/lending pair is risk-independent

Each lending position is isolated, meaning an unhealthy position in one market does not affect other positions. Similar to Euler V1 and Silo Finance designs. However, shared oracle dependencies can breach this isolation.

Utilization-based interest rate curves per isolated market

Each isolated market has its own interest rate curve based on utilization. Standard kinked curve model similar to Aave/Compound.

1:1 LRT token bridging from Ethereum to Aptos via LayerZero

Joule provides a bridging service for Liquid Restaking Tokens (LRTs) from Ethereum to Aptos using LayerZero. This introduces cross-chain trust dependencies into the lending protocol's collateral base.

Liquidity Anchors providing dApps easy access to lending pool liquidity for yield strategies

Liquidity Anchors are a novel primitive allowing other Aptos dApps to tap into Joule's lending pool liquidity for structured yield strategies. This creates composability but also dependency risk.

External oracle feeds for collateral pricing across isolated markets

Uses external oracle price feeds for collateral valuation. Oracle infrastructure on Aptos is less mature than on Ethereum, increasing staleness and manipulation risks.

Standard liquidation mechanism with fixed liquidation bonus

Undercollateralized positions are liquidated with a fixed bonus incentive for liquidators. Standard lending protocol pattern.

Isolated markets provide risk separation at the pool level, but share oracle dependencies. An oracle failure simultaneously affects all markets using that feed, negating the isolation benefit.

Bridged LRT tokens used as lending collateral inherit bridge security risk. A bridge compromise mints unbacked tokens that drain real assets from lending pools.

Oracle prices on Aptos may be derived from thin DEX liquidity, making them susceptible to manipulation. An attacker can move prices on DEXs with relatively small capital to influence oracle feeds.

External dApps accessing lending pool liquidity via Liquidity Anchors can create unexpected utilization spikes, preventing regular depositors from withdrawing during stress events.

Joule operates on both Aptos and Movement, sharing core contract logic. A vulnerability discovered on one chain may be exploitable on both before patches can be deployed.