Zephron Protocol

Zephron Protocol is a unified ecosystem that transforms physical gold into a liquid on-chain asset, enabling users to instantly borrow against their holdings.

Table of Contents

• The Problem
• Our Solution
• Architecture
• Product Deep Dive 1: Programmable Gold Protocol
  • Core Mechanics & User Flows
  • Mathematical Formulas
• Product Deep Dive 2: Digital Portfolio Platform
  • Core Mechanics & User Flows
  • Mathematical Formulas
• Product Deep Dive 3: Lending Protocol
  • Core Mechanics & User Flows
  • Mathematical Formulas
• Product Deep Dive 4: Integrated GOLD Lending Protocol
• Devnet Deployments
• Repository Structure
• Getting Started
  • Prerequisites
  • Clone & Install
  • Run the Frontend
  • Build & Test the Program
  • Deploy to Devnet
• Roadmap
• Contributing
• Security
• License
• Acknowledgements

The Problem

For millions of households, physical gold remains the primary store of wealth yet it is illiquid and unproductive. There is no instant financial infrastructure or liquidity base layer to unlock this static capital, connect USD and non-USD markets, or support the use of local stablecoins in everyday commerce. Existing tokenized gold products like XAUt only offer limited trading pairs and opaque custody, failing to provide true liquidity or seamless integration. The result is a borderless economy that remains out of reach, with trillions in real-world value trapped in slow, costly financial channels.

The current market is bifurcated, forcing households into a difficult trade-off.

The Physical Market: Owning physical gold provides true ownership but is plagued by high custodial costs, poor liquidity, slow T+2 settlement times, and a lack of utility.

Our Solution: A Unified Ecosystem and Protocol for Programmable Gold

The figure presents the final product with the integration of programmable gold.

We are building a vertically integrated, two-pronged solution that solves the core problems of trust, liquidity, and utility.

• The Digital Portfolio Platform: This is an intuitive gateway for users to seamlessly convert fiat currency (INR/USD/NPR) into tokenized gold. It provides banking-style features, including asset management, deposits, and collateralized lending, making digital gold accessible and useful.

• The Programmable Gold Protocol: This is the on-chain layer where gold's value is made programmable and liquid. By collateralizing assets within this transparent protocol, users can mint a stable, GOLD-pegged digital asset, unlocking liquidity and enabling participation in the broader digital economy without selling their underlying holdings.

• Unlocking Liquidity & Yield (Lending): The core utility of our ecosystem is the ability to unlock the value of your assets without selling them. Users can lock their tokenized gold as collateral to take out instant loans, providing immediate liquidity. This creates a powerful engine for both borrowing and yield generation. All lending is governed by a strict, real-time mathematical model to ensure system solvency at all times.

Architecture

The following diagram illustrates the complete system architecture of the Zephron Protocol, showing the integration between the on-chain smart contracts, oracle systems, and user interactions:

Architecture Components:

• On-Chain Program: Solana Anchor program implementing the GOLD protocol and lending pool
• Oracle Integration: Pyth Network for real-time price feeds (GOLD/USD, SOL/USD)
• Token System: Token-2022 program for GOLD token management
• Lending Pool: Integrated AMM-style pool with utilization-based interest rates
• User Accounts: PDA-based collateral accounts, lender positions, and borrower positions

View full resolution diagram

Product Deep Dive 1 with MVP: The Programmable Gold On-Chain Protocol

It allows users to lock SOL as an Asset as collateral to mint a synthetic, GOLD-pegged stable asset. This creates a capital-efficient way to access liquidity against crypto holdings, with risk managed transparently by on-chain smart contracts.

Program Id: EGtHEv1xJP3aA3fT5JVB7H2UXoR6s7rB6iYjkifDqdvQ

Signature: 7ruA1gESbkMz1tvoKNFmADHg3XtvptwwXLSk2JxKt3TmGtvUdaF2jXR4gkbJovokQSgQ8Qw85LTJDSSctef11rn

Initialization: https://explorer.solana.com/tx/5nQmjPPLXavsWMMmTauj6Lo23QkC9pRG1WUK8HpAdBWdyJQnUQHtm4w1VCKwY2vUhXwQWLtMF5wyqasFT4EKBXQ5?cluster=devnet

Core Mechanics & User Flows

1. Deposit & Mint: A user deposits an SOL asset into their personal, on-chain collateral vault (PDA). They can then mint a specified amount of the GOLD token against this collateral, provided their position remains safely over-collateralized.
2. Redeem & Burn: The user can repay their minted GOLD debt at any time. By burning GOLD tokens, they unlock and withdraw a corresponding amount of their SOL collateral.
3. Liquidation: If the value of the user's SOL collateral drops, their position's Health Factor decreases. If it falls below a minimum threshold, the position becomes eligible for liquidation. Any third-party user (a "liquidator") can repay a portion of the user's GOLD debt in exchange for receiving a discounted amount of their SOL collateral, thus securing the protocol.

Key Variables:

• L: Lamports of SOL in the user's collateral vault (1 SOL=10^9 lamports).
• Dgold: Amount of GOLD minted by the user (debt), with 9 decimals.
• Psol_usd: Price of SOL in USD from the Pyth oracle.
• Pgold_usd: Price of GOLD in USD from the Pyth oracle.
• HF: Health Factor, a dimensionless ratio of collateral value to debt value.
• HFmin: The minimum Health Factor before liquidation is triggered (e.g., 1.0).
• Bonus%: The liquidation bonus percentage paid to liquidators (e.g., 10%).

1. Collateral and Debt Valuation

• Value of SOL Collateral in USD (scaled to 10^9 precision):

• Value of Collateral in GOLD Terms (scaled to 10^9 precision): This formula converts the USD value of the collateral into its equivalent value in GOLD.

2. Health Factor and Liquidation

• Health Factor (HF) Calculation: This is the most critical risk metric. It measures how many times the collateral value covers the debt.

• Liquidation Condition: A position is deemed unsafe and open to liquidation when:

HF < HFmin

• Maximum Mintable GOLD: The maximum amount of GOLD a user can mint against their collateral L without being instantly liquidatable.

3. Liquidation Payout Calculation

• SOL Equivalent for Burned GOLD: When a liquidator burns an amount of GOLD (Dburn), this formula calculates the base amount of SOL they are entitled to from the borrower's vault.

• Total Liquidation Payout (with bonus): The liquidator receives the base SOL amount plus a bonus to incentivize them to secure the protocol.

Product Deep Dive 2: The Digital Portfolio Platform

This platform serves as the intuitive, regulated front-end to our ecosystem. It handles user onboarding (KYC/AML), fiat-to-crypto conversion, and provides a familiar interface for managing a portfolio of digital assets, including physically-backed tokenized gold. Its key feature is offering instant liquidity through gold-collateralized INR loans.

Core Mechanics & User Flows

1. Onboarding & Deposit: Users complete a standard KYC process. They can then deposit INR instantly via integrated payment gateways like Razorpay and Stripe.
2. Buy & Hold Gold: Users convert their INR balance into tokenized gold grams at real-time market prices. This gold is fully backed by SOL and Stablecoin as collateral.
3. Collateralize & Borrow: Users can lock their gold holdings as collateral to open an instant line of credit, borrowing INR against their assets without selling them.
4. Monitor & Repay: The platform provides a real-time dashboard to monitor the health of their loan (Collateralization Ratio). Users can repay the loan principal and accrued interest at any time to unlock their gold.
5. Liquidation: If the market price of gold falls and the loan's Collateralization Ratio breaches a minimum threshold, the platform's risk engine automatically sells just enough of the collateralized gold to bring the loan back to a healthy state.

Key Variables:

• G: Grams of gold held as collateral.
• Pt: Market price of gold per gram at time t.
• h: Collateral haircut (a safety buffer, e.g., 5% or 0.05).
• L: Loan principal in INR.
• CR: Collateralization Ratio.
• LTV: Loan-to-Value ratio.
• CRtarget: The ideal ratio at the initiation of a loan (e.g., 2.0 or 200%).
• CRmin: The minimum ratio that triggers a liquidation event (e.g., 1.5 or 150%).
• λ: Liquidation penalty applied to the collateral sold (e.g., 8% or 0.08).
• R(annual): The annual percentage rate (APR) for the loan.

1. Loan and Value Calculations

• Effective Collateral Value (Vc): The value of the collateral after applying the safety haircut.

• Collateralization Ratio (CR) and Loan-to-Value (LTV): CR measures collateral safety, while LTV is its inverse.

• Maximum Borrowing Capacity (Lmax): The maximum INR a user can borrow against their gold, based on the target CR.

2. Interest and Liquidation

• Interest Accrual (Compounding Daily): The outstanding loan balance grows over time based on the interest rate.

• Liquidation Trigger Price (Pliq): The critical gold price at which the Collateralization Ratio hits the minimum threshold and a liquidation is triggered.

• Partial Liquidation Sizing (ΔG): This formula calculates the precise amount of gold (ΔG) that must be sold to restore the loan's health to the target CR.

Product Deep Dive 3: The Lending Protocol

This is a decentralized lending and borrowing protocol built on Solana that enables users to deposit GOLD as collateral and borrow SOL/USDC against them. It implements a shares-based accounting system for fair distribution of interest and provides automated liquidation mechanisms to protect protocol solvency. The protocol uses Pyth oracles for real-time price feeds.

Program Id: 33s5M4sRp6LBV8mwHJz1EssyhQ3EHrHnDqQ94N1vy74q

Core Mechanics & User Flows

1. Initialize Bank & User: The protocol administrator initializes a Bank for each supported asset (SOL, USDC) with parameters like liquidation threshold and max LTV. Users create their User account to track their positions across all assets.

2. Deposit Collateral: Users deposit tokens into the protocol's bank vault. Deposits are tracked using a shares-based system, where users receive deposit shares proportional to their contribution.

3. Borrow Assets: Users can borrow assets up to their maximum borrowing capacity, determined by their total collateral value and the bank's max LTV parameter. Borrowed positions are also tracked using shares to handle interest accrual fairly across all borrowers.

4. Repay Borrowed Assets: Users repay their borrowed amounts plus accrued interest. Repayments reduce their borrow shares and improve their health factor, unlocking more collateral(GOLD).

5. Withdraw Collateral: Users can withdraw deposited collateral(GOLD) as long as their position remains sufficiently collateralized above the liquidation threshold.

6. Liquidation: When a user's health factor falls below 1.0 (indicating under-collateralization), liquidators can step in to repay a portion of the user's debt in exchange for their collateral plus a liquidation bonus. This protects the protocol from bad debt.

Key Variables:

• Dsol: Amount of SOL deposited by user (in lamports).
• Dusdc: Amount of USDC deposited by user.
• Bsol: Amount of SOL borrowed by user.
• Busdc: Amount of USDC borrowed by user.
• Psol_usd: Price of SOL in USD from Pyth oracle.
• Pusdc_usd: Price of USDC in USD from Pyth oracle.
• LT: Liquidation Threshold (e.g., 0.8 or 80%).
• maxLTV: Maximum Loan-to-Value ratio (e.g., 0.75 or 75%).
• LB: Liquidation Bonus percentage (e.g., 0.05 or 5%).
• LCF: Liquidation Close Factor (e.g., 0.5 or 50%).
• HF: Health Factor, ratio of collateral value to borrowed value.
• TD: Total Deposits in a bank.
• TDS: Total Deposit Shares in a bank.
• TB: Total Borrowed from a bank.
• TBS: Total Borrow Shares in a bank.

1. Shares-Based Accounting

The protocol uses a shares system to fairly distribute interest and fees among depositors and borrowers.

• Deposit Shares Calculation: When a user deposits amount A into a bank:

• Borrow Shares Calculation: When a user borrows amount B:

2. Collateral and Borrowing Calculations

• Total Collateral Value in USD:

• Total Borrowed Value in USD:

• Maximum Borrowable Amount: The maximum amount a user can borrow based on their collateral:

• Borrowing Condition: A user can borrow amount B only if:

3. Health Factor and Liquidation

• Health Factor (HF) Calculation: The critical metric determining position safety:

• Liquidation Condition: A position becomes liquidatable when:

• Liquidation Amount: When liquidating, the liquidator repays:

• Liquidation Payout: The liquidator receives collateral worth:

This incentivizes third-party liquidators to monitor and liquidate unhealthy positions, protecting the protocol from insolvency.

4. Interest Accrual (Simplified Implementation)

The protocol includes basic interest accrual for deposits using exponential compounding:

Product Deep Dive 4: Integrated GOLD Lending Protocol

The GOLD protocol includes a built-in lending and borrowing system that enables users to deposit GOLD tokens into a lending pool to earn interest, or borrow GOLD tokens against their deposits. This creates a capital-efficient way to utilize GOLD tokens while maintaining liquidity.

Program Id: Hkb3K3f9FWtosSZwk9KRbV8izZ2hFEF9LgxSwVxvDFjL

Core Mechanics & User Flows

1. Deposit Tokens: Users deposit GOLD tokens into the lending pool vault. Deposits earn supply interest based on the pool's utilization rate. The deposited amount also serves as collateral for potential borrowing.

2. Borrow Tokens: Users can borrow GOLD tokens from the pool up to 75% of their deposited amount (75% LTV). Borrowers pay interest that accrues over time based on the current borrow rate.

3. Repay Tokens: Users repay their borrowed amount plus accrued interest. Repayments first cover accumulated interest, then reduce the principal debt.

4. Withdraw Tokens: Users can withdraw their deposited tokens (minus any outstanding debt). Withdrawals first come from accumulated interest, then from the principal deposit.

Key Features

• Dynamic Interest Rates: Interest rates adjust automatically based on pool utilization:

  • Supply Rate: Lenders earn interest based on utilization (typically 90% of borrow rate × utilization)
  • Borrow Rate: Borrowers pay interest that scales from 2% (base) up to 20% (at 90% utilization)

• Collateral Factor: Users can borrow up to 75% of their supplied amount (75% LTV)

• Interest Accrual: Interest accrues per slot based on the current rates and time elapsed

• Automatic Updates: Pool rates and positions are automatically updated on each transaction

Key Variables:

• S: Total amount of GOLD tokens supplied to the pool
• B: Total amount of GOLD tokens borrowed from the pool
• U: Utilization rate = (B / S) × 100%
• R_supply: Annual supply interest rate (basis points)
• R_borrow: Annual borrow interest rate (basis points)
• CF: Collateral factor = 75% (0.75)
• I_lender: Accumulated interest for lender
• I_borrower: Accumulated interest for borrower
• slots_per_year: ~630,720,000 slots per year

1. Interest Rate Calculation

Interest rates are calculated dynamically based on pool utilization:

• Borrow Rate:

  • Base rate: 2% (200 basis points)
  • Scales linearly with utilization up to 20% at 90% utilization
  • Formula: R_borrow = 200 + (U / 90) × 1800 (in basis points)

• Supply Rate:

  • Derived from borrow rate and utilization
  • Formula: R_supply = (R_borrow × U × 90) / 10000 (in basis points)

2. Interest Accrual

Interest accrues continuously based on time (slots):

• Lender Interest:

  I_lender = (amount_supplied × R_supply × slots_elapsed) / (10000 × slots_per_year)
  

• Borrower Interest:

  I_borrower = (amount_borrowed × R_borrow × slots_elapsed) / (10000 × slots_per_year)
  

3. Borrowing Capacity

Users can borrow up to a percentage of their supplied amount:

• Maximum Borrowable:

  Max_Borrow = (amount_supplied × CF)
  

• Borrowing Condition:

  (current_debt + requested_amount) ≤ Max_Borrow
  

4. Withdrawal Capacity

Users can withdraw their deposits minus any outstanding debt:

• Available Balance:

  Available = (amount_supplied + accumulated_interest) - (amount_borrowed + accumulated_interest_owed)
  

Example Transaction Flow

A user can combine minting and lending in a single atomic transaction:

1. Deposit Collateral & Mint: User deposits 0.5 SOL and mints 0.000375 GOLD tokens
2. Deposit to Lending Pool: User deposits 0.0001 GOLD into the lending pool
3. Earn Interest: User earns supply interest on their deposit
4. Borrow (Optional): User can borrow up to 75% of their deposit (0.000075 GOLD)
5. Repay & Withdraw: User repays debt and withdraws their deposit plus interest

Program Instructions

• deposit_tokens(amount): Deposit GOLD tokens to the lending pool
• borrow_tokens(amount): Borrow GOLD tokens from the pool (up to 75% LTV)
• repay_tokens(amount): Repay borrowed tokens plus interest
• withdraw_tokens(amount): Withdraw deposited tokens (minus debt)

Transaction Example

See a combined mint + deposit transaction:

• Combined Transaction: Mint GOLD and deposit to lending pool in one atomic transaction
• All program logs are visible in a single transaction signature on Solana Explorer

Devnet Deployments

GOLD Protocol (Programmable Gold)

• Program ID: Hkb3K3f9FWtosSZwk9KRbV8izZ2hFEF9LgxSwVxvDFjL
• Key Transactions:
  • Initialize: https://explorer.solana.com/tx/5nQmjPPLXavsWMMmTauj6Lo23QkC9pRG1WUK8HpAdBWdyJQnUQHtm4w1VCKwY2vUhXwQWLtMF5wyqasFT4EKBXQ5?cluster=devnet
  • Deposit & Mint: https://explorer.solana.com/tx/5DGJHuLAW1fq85Pgp9eA9cJiW1E75dUpoxqLZHMvpL2Y2rFqZU92y1YpqJHDiHLegu2dk1PFuRNs2FM5px9YvXFh?cluster=devnet
  • Redeem & Burn: https://explorer.solana.com/tx/4PGQosQtyKnyXhh4MBoAoW3aLuQnAjk8BREk1P5QEYvfTeRk8yykVB5w4y6cS4aDGxajGJxw3J87pwAnwZiPHg9v?cluster=devnet
  • Update Config: https://explorer.solana.com/tx/4ggxS1Ktsim19wxw76LbVADA9huHUs3TN8SQaYSZMBLxDinRCZQ7LDchWc5kwH5P9e7qnoCZeqDnP376xAGhtpHs?cluster=devnet
  • Liquidate: https://explorer.solana.com/tx/224iqrkKs8aaQ5PZrax6MsFthH5Sxt3WzXJPpKfYYkYRrqkM6JaDj85wnc2odaQgcdnUXwTDXgNptB6tffXKQmbg?cluster=devnet

Integrated Lending Protocol

• Program ID: Hkb3K3f9FWtosSZwk9KRbV8izZ2hFEF9LgxSwVxvDFjL (same as GOLD protocol)
• Key Features:
  • Deposit GOLD tokens to earn supply interest
  • Borrow GOLD tokens up to 75% LTV
  • Dynamic interest rates based on utilization
  • Combined mint + deposit in single transaction
• Pyth Oracles:
  • GOLD/USD PriceUpdateV2: https://explorer.solana.com/address/2uPQGpm8X4ZkxMHxrAW1QuhXcse1AHEgPih6Xp9NuEWW?cluster=devnet
  • SOL/USD PriceUpdateV2: https://explorer.solana.com/address/7UVimffxr9ow1uXYxsr4LHAcV58mLzhmwaeKvJ1pjLiE?cluster=devnet

Repository Structure

/Frontend
  apps/
    buyer/             # Next.js app (user portfolio & flows)
  packages/
    central/           # Shared atoms/hooks
    db/                # Prisma client & migrations
    ui/                # UI library components
/program
  programs/gold/       # Anchor program for GOLD protocol
  tests/               # Anchor mocha tests
  target/idl/          # IDL output
/lending
  programs/lending/    # Anchor program for lending protocol
  tests/               # Test suite (bankrun & onchain)
  target/idl/          # IDL output

Getting Started

Prerequisites

• Node.js 18+
• npm or pnpm
• Rust toolchain (stable)
• Solana CLI (solana --version)
• Anchor CLI (anchor --version)

Clone & Install

# Clone
git clone https://github.com/zephron-labs/zephron-protocol.git

# Install (root)
npm install

# Install workspace deps if needed
cd Frontend/apps/buyer && npm install

solana config set --url https://api.devnet.solana.com
solana airdrop 2 # on devnet

Run the Frontend

cd Frontend/apps/buyer
npm run dev
# App: http://localhost:3000

Build & Test the Program

# For the GOLD protocol
cd program
npm install
anchor build
npm test

# For the Lending protocol
cd lending
npm install
anchor build
npm test

Deploy to Devnet

# For the GOLD protocol
cd program
anchor deploy
# Verify IDL at target/idl/gold.json

# For the Lending protocol
cd lending
anchor deploy
# Verify IDL at target/idl/lending_protocol.json

Roadmap

• Expand collateral types beyond SOL
• Oracle redundancy and failover
• Governance and parameter management
• Integrate automated keepers for liquidations
• Mobile-first portfolio app

Contributing

Contributions are welcome! Please:

• Open an issue to discuss substantial changes
• Submit focused PRs with clear descriptions
• Follow existing code style and linting

Security

• Do not use in production without a formal audit
• Report vulnerabilities privately via issues marked as security or contact maintainers
• Protocol depends on oracle integrity (Pyth) and proper risk parameters

License

MIT — see LICENSE.

Acknowledgements

• Pyth Network for reliable on-chain price feeds
• Solana and Anchor contributors
• The broader open-source community