Proof of Demand (PoD) Mechanics

Proof of Demand (PoD) is a foundational concept in Peapods' lending architecture. It formalizes what 100% utilization represents. Specifically, it signals that capital is fully borrowed and that borrowing demand is provably real, immediate, and under-supplied.

Rather than using emissions, bribes, or external incentives to attract liquidity, PoD leverages interest rates as a dynamic market signal. When a Self-Lending Pod is initialized, utilization of the lending pair is set to 100%, simulating a state of full demand with no redeemable liquidity. This triggers a sequence of predictable, permissionless incentives.

Key Mechanics

Utilization-Driven Rate Adjustment The LVF lending pools employ a non-linear interest rate model. As utilization approaches 100%, borrowing APRs rise exponentially, increasing the reward for capital suppliers.

No Emissions Required All yield offered to lenders is derived entirely from borrower-paid interest, not from protocol incentives. This makes supply-side returns fully demand-driven and sustainable.

Reverse Dutch Auction for Capital High utilization advertises increasingly attractive APRs to the market. When the yield matches the risk appetite of lenders, capital enters. As supply arrives, utilization falls, and interest rates normalize.

This model allows borrowers to prove demand through their willingness to pay, removing the need for liquidity mining programs and incentives via emissions. Capital is only attracted when and where it’s needed which allows for real yield pricing and capital efficiency at every stage.