> For the complete documentation index, see [llms.txt](https://docs.arenas.fi/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.arenas.fi/atomica/atomica-faq.md).

# Atomica FAQ

#### How is this different from typical DeFi lending protocols like Aave?

Traditional DeFi money markets are **overcollateralized**: you lock more value in collateral than you borrow, and on-chain liquidations enforce repayment.\
Arenas Financing markets are **credit-based and approval-gated**:

* **No on-chain collateral**.
* **Market Operator** (or **Approver**) approval is required for obligations.
* Every loan is backed by a **real-world legal agreement**, not just smart-contract rules.

***

#### Do I need to provide on-chain collateral to borrow?

No. Borrowers **do not** post on-chain collateral.\
Instead, you:

1. Create a **financing application** and financing request.
2. Sign a **real-world financing agreement contract** off-chain.
3. Wait for **Market Operator** (or **Approver**) approval and disbursement.

***

#### What happens if a borrower does not repay?

Because there is no on-chain collateral to liquidate:

* The protocol will show the loan as **in default** on-chain.
* Recovery relies on the **off-chain enforcement** of the signed loan agreement.
* Losses from defaults can affect the **value of lender LP tokens** in the affected pool.
* Liquidated obligation can be sold on a secondary market at a discount and the earned amount will be refunded to the affected pool.

Exact processes for handling defaults depend on the legal and operational framework of each market.

***

#### Can I withdraw my funds at any time as a lender?

You can **request a withdrawal at any time**, but:

* Withdrawals are **subject to available liquidity** in the pool.
* If much of the pool is lent out, your request may be:
  * **Partially fulfilled**, with the rest staying as LP tokens.
  * **Delayed** until more loans are repaid.

The protocol always returns either assets or LP tokens; it does not “freeze” your funds without a claim.

***

#### How do borrowers receive the funds?

After a financing request is approved:

* The executor (you or a designated address) calls the protocol to **initiate the obligation**.
* The **Financing Market Adapter** sends the obligation amount to the recipient address specified in the financing request.

This address can be different from the borrower’s own wallet if the deal structure requires it.

***

#### How is interest for lenders generated?

Lenders earn from:

* **Interest payments** from borrowers on active loans.
* Potential **upfront incentives** borrowers pay to attract more capital.
* Optional **reward programs** funded by the protocol or third parties.

All of this is reflected in the **growing value of LP tokens** over time.

***

#### Who can be a Market Operator?

A Market Operator is a **permissioned role** responsible for:

* Reviewing financing requests if there is no separate financing Approver role.
* Approving or rejecting new financing requests.
* Monitoring portfolio quality and market configuration.
* Making agreements with Pool Curators to attract liquidity to the market.
* Support market operational activity by making control over upgradable settings.

The specific criteria for who can act as a Market Operator and how they are appointed depend on the specific market and governance setup.

***

#### Is yield guaranteed?

No. Yield is **not guaranteed**.

* If borrowers repay on time, lenders can earn **interest and rewards**.
* If borrowers default, or if markets change, returns may be **lower than expected or negative**.

Always evaluate the risks before supplying or borrowing.

***

#### Where can I see the contract addresses?

All official contract addresses are listed in the **“Deployed Contracts”** section of the docs.\
Always verify that the address you interact with matches the documented one for your network