Borrow against what
you already own.
Arrow Finance is a collateralized debt position (CDP) protocol on Robinhood Chain. Deposit crypto, stablecoins, or tokenized equities as collateral, mint aUSD against them, and keep your upside without selling a share.
Table of Contents
Overview
Arrow Finance is a single-chain, overcollateralized CDP protocol deployed natively on Robinhood Chain, the Arbitrum Orbit L2 built for tokenized real-world assets. Users deposit approved collateral into a vault and mint aUSD, a USD-denominated, overcollateralized stablecoin, against it.
What makes Arrow Finance distinct from a typical crypto CDP is the collateral set. Alongside crypto majors, liquid-staking tokens, and stablecoins, Arrow Finance is the first CDP to accept tokenized public equities and ETFs as collateral, settled natively on Robinhood Chain. A holder of tokenized shares can borrow liquidity against a position without triggering a taxable sale and without leaving the chain their shares already live on.
Every vault is independently collateralized, independently liquidated, and independently priced. Solvency rests entirely on real, overcollateralized positions, so the system stands on its own economics from day one and scales cleanly as demand grows.
Arrow Finance is built around the mechanics that make lending markets work: collateralized borrowing, tiered risk parameters, a Stability Pool for liquidations, and simple one-token-one-vote governance. Every component earns its place by making borrowing safer, cheaper, or more capital-efficient.
Vaults & Collateral
A vault is a single-owner position holding one collateral asset against one debt balance. Positions are tracked as clean ERC-20 debt accounting: transparent, gas-efficient, and composable with the rest of the on-chain ecosystem.
2.1 Supported collateral
Collateral falls into three classes: crypto majors and liquid-staking/restaking tokens, stablecoins, and tokenized equities and ETFs issued natively on Robinhood Chain.
| Asset | Class | LTV | Liquidation threshold |
|---|---|---|---|
| USDC | Stablecoin | 90% | 95% |
| sUSDe | Yield-bearing stablecoin | 85% | 90% |
| wstETH / weETH | Liquid staking / restaking | 72% | 80% |
| WETH | Crypto major | 75% | 82% |
| WBTC | Crypto major | 70% | 78% |
| Tier 1 tokenized equities large-cap, index-member, high daily volume | Tokenized RWA | 55% | 65% |
| Tier 2 tokenized equities smaller-cap, lower liquidity | Tokenized RWA | 40% | 52% |
Parameters above are illustrative starting values, set and adjustable only by ARROW governance per Section 5.
2.2 Minting aUSD
A vault owner may mint up to their collateral's LTV limit. Debt is tracked continuously against the stability fee (Section 4); repaying debt plus accrued fees releases a proportional share of collateral.
aUSD is the protocol's single debt token, minted and burned 1:1 against vault debt. Its peg is anchored by direct, at-par redemption against collateral, a hard economic floor that holds aUSD at $1 through continuous, permissionless arbitrage.
2.3 Risk tiering
Collateral parameters are derived from a published risk-classification methodology rather than set arbitrarily. Crypto and stablecoin collateral is scored on on-chain liquidity depth, historical volatility, and oracle quality. Tokenized equity collateral is scored on 20-day realized volatility, average daily notional volume on Robinhood Chain's equity venue, free float, and index membership.
Lower-liquidity, higher-volatility assets receive lower LTV and a wider gap between LTV and liquidation threshold. This is why Tier 2 equities and newly onboarded assets always start with the most conservative parameters available and are only loosened by a governance vote after a live track record.
Liquidations & the Stability Pool
When a vault's health factor drops below 1, its debt and collateral become eligible for liquidation. Arrow Finance uses one unified liquidation path for every collateral type, keeping the system simple, predictable, and straightforward to audit.
3.1 The Stability Pool
Users deposit aUSD into the Stability Pool. When a vault is liquidated, the pool burns the equivalent aUSD debt and receives the vault's collateral at a discount to its oracle price. Depositors are exposed to whatever collateral gets liquidated, in proportion to their share of the pool, in exchange for the liquidation discount.
If the Stability Pool is ever too thin to absorb a liquidation, the shortfall is covered by a redistribution across remaining open vaults of the same collateral type, a proven, battle-tested backstop that keeps the system fully solvent even under stress.
3.2 Equity market-hours handling
Tokenized equity collateral only trades, and only prices freshly, during the hours the underlying market is open. Outside those hours the oracle reports the last confirmed close.
This is a required code path, not an edge case. Arrow Finance widens the effective liquidation buffer for equity-collateralized vaults heading into a market close and halts new equity-collateral borrowing during the pre-close window, so that a position cannot be minted against a price that is about to go stale for 16+ hours over a weekend.
Fees & Treasury
Arrow Finance earns from two clean, real revenue sources: the stability fee and the liquidation penalty. Every fee is paid in real assets, giving the protocol a durable, sustainable income base that grows directly with usage.
| Fee | Rate | Destination |
|---|---|---|
| Stability fee | 0.5% – 4% APR on outstanding debt, set per collateral tier | Surplus Buffer (treasury) |
| Liquidation penalty | 10% – 13% of seized collateral, varies by tier | Split: Stability Pool discount / Surplus Buffer |
| Redemption fee | 0.25% – 2%, floats with redemption volume | Surplus Buffer |
The Surplus Buffer is a governance-controlled reserve funded entirely by realized protocol revenue. It backstops bad debt from a shortfall event before it ever touches Stability Pool depositors, and any excess above the target reserve size may be allocated by an ARROW vote, including, if governance chooses, direct distribution of real protocol revenue to ARROW holders.
Governance ($ARROW)
ARROW is a fixed-supply governance token with a clean one-token-one-vote model. Every holder votes directly with equal weight, and holding the base token is always the strongest position in the system, keeping governance transparent, fair, and simple to reason about.
ARROW has a fixed total supply set at genesis, so every holder's stake is protected from dilution. Its value is driven by governance rights and a discretionary share of real protocol revenue, value backed by genuine on-chain cash flow.
Architecture
Arrow Finance is deployed exclusively on Robinhood Chain and makes no assumptions about, or provisions for, other chains.
Risks
| Risk | Description | Mitigation direction |
|---|---|---|
| Contract Smart contract risk |
Bug in Vault Manager, Stability Pool, or oracle integration. | Audits, conservative debt ceilings on new collateral, staged rollout. |
| Oracle Equity market-hours gap |
Tokenized equity price goes stale outside trading hours; a large move can occur before the price updates. | Widened liquidation buffer and paused new borrowing near close, per Section 3.2. |
| Liquidation Cascading liquidations |
A sharp move across correlated collateral (e.g. a broad equity selloff) triggers many liquidations at once, thinning the Stability Pool. | Per-collateral debt ceilings; conservative Tier 2 parameters; redistribution fallback. |
| Concentration Collateral concentration |
Tokenized equity collateral can be correlated to broader market drawdowns in a way crypto collateral is not. | Tiering, debt ceilings per asset, governance review of concentration. |
| L2 Sequencer / chain risk |
Robinhood Chain sequencer downtime could delay liquidations or redemptions. | Grace-period liquidation logic on sequencer recovery, consistent with standard Orbit chain practice. |
| Peg aUSD peg risk |
aUSD can trade away from $1 under stress before redemption arbitrage closes the gap. | Direct at-par redemption anchors the peg through continuous arbitrage. |
| Legal Regulatory |
Tokenized equities as collateral sit inside securities regulation that pure-crypto CDPs do not have to consider. | Collateral limited to equities natively issued and compliant on Robinhood Chain; legal review before onboarding. |
This document describes an illustrative protocol design for documentation practice. Figures, parameters, and the "Robinhood Chain" deployment target are illustrative and should be verified against the live specification before any real deployment or financial decision.