Executive Summary

Cap is a decentralized marketplace for credible financial guarantees, where Delegators post crypto assets to provide overcollateralized contractual guarantees on individual institutional loans, earning deterministic guarantee fees (up to ~6% annually) while maintaining full legal reimbursement rights against the borrower upon loss. Using restaking infrastructure, Delegators maintain verifiable ownership of their assets in segregated smart contract escrow, with  transparent, per-loan risk isolation.

Cap: A Guarantee Marketplace

Cap is a programmable, tripartite guarantee model where

•    Lenders supply capital to a global USD liquidity pool

•    Borrowers (whitelisted, regulated financial institutions) draw from this pool conditional on guarantee coverage

•    Delegators post overcollateralized coverage to guarantee a specific borrower and loan, earning yield for taking on defined credit exposure.

The separation between the collateral provider (Delegator) and the borrower leads to a new onchain primitive: credit underwriting. Delegators act as pre-funded and overcollateralized guarantors for individual loans to a single regulated FI, receiving guarantee fees for absorbing credit risk. Each guarantee operates like a bilateral, onchain secured facility, where losses are isolated by loan and Delegators retain reimbursement rights under an indemnity framework.

Designed for Delegators

Cap’s guarantee marketplace design is tailored for Delegators. Because counterparties are known ex-ante and collateral is siloed, Delegators can independently assess and price risk, setting parameters such as premium rate, collateral type, and LTV for each loan. This is in stark contrast to traditional DeFi lending supply pools, where collateral management is determined through governance and risk pricing happens algorithmically against a general pool.

Why Pooled Design Exists

DeFi lending protocols, whether monolithic like Aave, or curated like Morpho, typically employ pooled collateral structures. Regardless of design choice, pooling is necessary for permissionless markets because they serve anonymous, open borrower bases. The benefit is that it ensures accessible deep liquidity for the borrowers, leading to higher capital utilization for the lenders. Inevitably, risk is managed by governance (or curator or market creators) on a pool level, defining eligible collateral, LTV ratios, and credit spreads for all participants.

While effective for open markets, pooled models are not built for the separation of collateral providers and borrowers, making collateral providers passive, homogeneous price takers. They have no agency over borrower quality and loan terms, instead earning protocol-set APYs based on collective pool performance. This trade‑off is necessary when borrower identities are unknown and risk cannot be assessed ex‑ante.

How Cap Differs

Cap’s model, by contrast, leverages borrower transparency to break away from centralized risk management. Because all Borrowers are whitelisted financial institutions and loan terms are known at origination, Delegators can manage risk autonomously at the loan level rather than relying on governance to price generalized market risk. In other words, Delegators are active underwriters of identifiable, institution-specific credit exposures.

As a result, they can quote the guarantee premium for backing a specific institution and loan.

Practically speaking, ETH Delegators can earn:

•    Up to ~3% fixed annual guarantee premium on notional collateral

•    ~3 % additional restaking yield when using stakable assets such as ETH.

Credit underwriting can be replicated in both monolithic and isolated lending markets by borrowing USD against collateral and re‑lending directly to a borrower, but Cap offers a cleaner implementation.

In monolithic markets, your exposure is a fractional claim on a pooled (possibly rehypothecated) liquidation engine, whereas Cap provides a direct crypto‑vs‑USD position against a specific, known institution.

In isolated markets such as Morpho, a similar whitelisted‑borrower, USD‑only structure is possible, but it typically requires curators to source and coordinate liquidity for each individual market, adding friction compared with Cap’s single, global USD liquidity pool.

Let’s dive deeper.

Eliminating governance bottlenecks

Pooled protocols’ reliance on governance for risk management pushes risk parameters toward conservatism as the pool grows, because the system is underwriting an unknown heterogenous borrower set. The consequence is rigid asset onboarding, slow parameter adjustment, and structurally suboptimal capital efficiency, as credit risk is generalized to the pool.

Cap’s architecture removes much of the governance bottleneck by shifting risk decisions to the deal level via per‑loan risk modeling, rather than relying solely on system‑wide parameters. This restores proper incentive alignment: risk takers set the terms. Specifically, Delegators have autonomy over collateral type, LTV, and guarantee premium for each institutional loan they underwrite. And because each guarantee is loan-specific and fully siloed, a mispricing on one borrower cannot contaminate other positions. While the shared USD pool still requires global safeguards, Delegators have meaningful flexibility where it matters most.

This combination of Delegator “skin in the game” and loan-level segregation enables a robust collateral universe, more responsive pricing of credit risk, leaner governance overhead, and materially higher capital efficiency than pooled, governance-driven models.

Siloed and Verifiable Escrow

Pooled collateral designs typically involve shared asset exposure and rehypothecation to increase capital efficiency. However, this creates systemic contagion risks. Even when loans are formally overcollateralized, a rehypothecated system is only as strong as the weakest collateral asset. One volatile asset can create collateral redemption risks, leading to cross-asset contagion risks of the entire pool.

In Cap, each Delegator’s collateral is escrowed to secure the designated loan and borrower. Because the escrow is segregated per loan, losses are borne locally, providing redemption guarantees at all times. Furthermore, the escrow is transparent and programmatic—rather than centralized balance sheets or human-controlled multisigs —reducing custodial risk for the collateral provider. Effectively, Cap replaces opaque OTC or CeFi lending as a safer alternative with verifiable, programmable guarantees.

Whitelisted Borrowers + USD Liabilities = Predictability

Cap’s lending market structure is narrow by construction, lending to a curated set of regulated financial institutions and denominating all debt in USD.

As a result, this achieves:

Simplified risk profile: Delegators face “crypto collateral vs. USD” credit exposure to regulated financial institutions, not “crypto collateral vs. volatile borrow asset” against unknown borrowers.

Predictable utilization: Because the set of borrowers are known, utilization and rate behavior are more predictable. Forecastable utilization patterns lead to narrower risk surfaces, resulting in long-term stability that can better withstand market volatility.

Automated Delegations

Cap’s guarantee system is fully automated for Delegators. Through Cap’s interface, Delegators can easily deposit assets and allocate them to institutional borrowers. Once active, Delegators accrue yields seamlessly: guarantee premiums flow directly from borrower repayments in USD, and staking rewards compound from underlying staking protocols. Monitoring positions is straight-forward: premiums, restaking rewards, and redemptions are handled programmatically, with clear dashboards for exposure, yield, and term status.

This simplified experience allows Delegators to act as institutional underwriters without building internal ops or risk infrastructure. Cap abstracts away the mechanics of escrow  and accounting into a unified workflow, so Delegators focus on three decisions only: which borrower to back, how much collateral to allocate, and what premium to require.

Conclusion

Aave and Morpho pioneered efficient, permissionless lending pools for open borrower markets. Cap extends that foundation to known‑counterparty credit markets, where institutional borrowers meet Delegators through programmable guarantees.

For collateral providers seeking deterministic yield and borrower transparency, Cap represents the natural evolution of DeFi lending architecture.