Credit delegation allows a depositor to deposit funds in the protocol to earn interest, and delegate borrowing power (i.e. their credit) to other users. The enforcement of the loan and its terms are agreed upon between the depositor and borrowers, which can be either off-chain via legal agreements or on-chain via smart contracts.
- The supplier (aka delegator) to earn extra yield on top of the yield they already earn from the protocol,
- The borrowers (aka delegatees) to access an uncollateralized loan.
This is done for each debt token that needs to be delegated.
The borrower's available credit is reduced by the borrowed amount.