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Varla was built from the ground up for prediction markets. Every design decision optimizes for the unique properties of prediction market collateral.

Cross-Margin Lending

Portfolio-level collateral management, not isolated positions

Tiered Risk System

Dynamic LTV (50-80%) based on market liquidity and volatility

Non-Custodial

Your positions, your control — smart contract escrow

Permissionless Liquidations

Fully on-chain, transparent, and incentivized

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Cross-Margin Architecture

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The Power of Portfolio Lending

Most lending protocols use isolated vaults — each collateral type requires a separate loan. Varla uses cross-margin, where all your positions combine into a single collateral pool.
Your total portfolio value determines borrowing power, not individual positions.
Example Portfolio:
├── Election Market YES:     $500  (65% LTV)
├── Sports Market YES:       $300  (65% LTV)  
└── Crypto Market YES:       $200  (80% LTV)
────────────────────────────────────────────
Total Collateral Value:    $1,000
Weighted Max Borrow:         ~$680

ONE position to manage, ONE health factor
Benefits:
  • Higher capital efficiency
  • Single health factor to monitor
  • Flexible rebalancing without closing vaults

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Tiered LTV System

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Risk-Adjusted Borrowing Power

Not all prediction markets are equal. A high-liquidity political market is very different from a niche sports event. Varla assigns risk tiers to each market based on objective criteria.
TierLTVCriteriaExamples
Conservative80%High liquidity (>$1M depth), established marketsMajor elections, flagship events
Moderate65%Standard liquidity, active tradingRegular markets, popular topics
Risk50%Lower liquidity, higher volatilityNew markets, niche events

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How Tiers Are Assigned

1

Liquidity Analysis

VarlaOracle monitors orderbook depth. Markets with thin liquidity get lower LTV.
2

Volatility Check

Historical price movements affect tier assignment. Volatile markets = lower LTV.
3

Time to Resolution

Markets close to resolution have adjusted risk parameters (early-closure rules).
4

Oracle Confidence

Price feed reliability affects tier. Conservative pricing (min of spot, TWAP) protects lenders.
Tier LTVs are protocol defaults (80/65/50%). Governance can set per-position overrides that only reduce LTV — never increase it.

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Non-Custodial Design

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Your Keys, Your Collateral

Varla never takes custody of your positions in a traditional sense.
When you deposit collateral, it’s held by the VarlaCore smart contract — not a company, not an individual. The code is the custodian.
The contract can only release your collateral under specific conditions:
  • You repay your debt (full withdrawal)
  • You’re liquidated (partial seizure to repay debt)
  • No other release paths exist
All operations are transparent and auditable. You can verify exactly where your collateral is at any time.

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Permissionless Liquidations

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Decentralized Enforcement

When a position becomes unhealthy (health factor < 1.0), anyone can liquidate it. This ensures:

No Single Point of Failure

Multiple liquidators compete to maintain protocol health. No reliance on a single keeper.

Fast Response

Competition incentivizes quick action. Unhealthy positions are resolved rapidly.

Transparent Rules

All liquidation logic is on-chain. Anyone can verify the math.

Fair Incentives

Variable bonus (5-15%) based on position health ensures proper compensation.

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Variable Liquidation Bonus

The liquidation bonus scales with how unhealthy the position is:
Health FactorBonusRationale
~1.0 (just liquidatable)~5%Minimal incentive needed
~0.9~10%Moderate urgency
≤ 0.8~15%High urgency, max incentive
This mechanism ensures positions get liquidated quickly when needed, while minimizing costs to borrowers when positions are only slightly unhealthy.
These are protocol defaults. Governance can adjust the bonus curve, set per-tier maximums, and create per-position overrides (which can only lower the bonus).

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Conservative Oracle Design

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Protecting Lenders

The VarlaOracle uses multiple safeguards to ensure accurate, manipulation-resistant pricing: 
Final Price = min(Spot Price, TWAP)
By taking the minimum of spot and TWAP:
  • Attackers can’t pump spot price to inflate collateral value
  • TWAP provides resistance to short-term manipulation
  • Lenders are protected from artificially inflated collateral

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Lender Protection

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Reserve Fund

10% of all borrower interest goes to a protocol reserve fund:
  • First-loss coverage for bad debt
  • Lenders are protected before the protocol takes risk
  • Reserve is consumed before losses are socialized to LPs