1. CALIBER [Yield]

CALIBER: A Scalable Collateralization Registry System for DeFi (UCC Section 7)

Outside of T-bill products, existing RWA tokenization models struggle with tokenizing physical assets: they often have weak enforcement, making liquidation and risk management inefficient and often catastrophic for crypto-native participants.

USD.AI introduces CALIBER (Collateralized Asset Ledger: Insurance, Bailment, Evaluation, and Redemption) a new offchain-onchain framework utilizing Uniform Commercial Code (UCC Section 7). It is designed to enable direct asset tokenization, enforceable redemption, and integrated insurance for GPU hardware. As DeFi matures beyond money markets into capital markets, CALIBER ensures structured but uncompromised growth for USD.AI.

Due to the parameters around UCC 7, all representations must be in 1:1 form and therefore in an ERC-721 or equivalent format. ERC-20 representations, while more liquid, have elevated risk levels resulting from poor fractionalization designs, which can trigger securities laws and introduce complexities around asset redemptions.

Key Parties

Borrower: Owns GPUs via Bankruptcy Remote Special Purpose Vehicle (SPV)

Tokenizing Agent: Legal entity that tokenizes GPUs to enable onchain loan execution. Currently, Permian Labs is the only approved Tokenizing Agent for USD.AI GPU loans.

Datacenter: The warehouse owner that custodies the GPUs (providing the power, water, internet connectivity and security that enable the use of the Borrower's GPUs).

Lender: The capital provider lending funds to Borrower, sUSDai holder.

Flow of Funds

Tokenization via Bailment

In order obtain financing, the Borrower must first contribute their GPUs to a bankruptcy remote SPV that is a wholly owned subsidiary entity managed by an independent manager (who exists solely to ensure bankruptcy remoteness). This structure ensures that if the Borrower goes bankrupt, the GPUs are kept outside of claim from any other creditors of the Borrower.

After contribution, the SPV signs a Bailment Agreement with the Datacenter that is warehousing the SPVs. The Bailment serves to create legally enforceable "Electronic Documents of Title", pursuant to Article 7 and Article 12 of the Uniform Commercial Code (represented with an ERC-721 NFT). The Bailment names the Datacenter as Bailee and the holder of the Electronic Document of Title as Bailor. Permian Labs serves as Tokenizing Agent for the transaction, minting the NFTs on behalf of the Borrower pursuant to terms outlined in a services agreement. This establishes digital property rights, enabling the Borrower to post collateral digitally in order to borrow funds against their GPUs while maintaining all normal business operations (signing colocation agreements with datacenters, rental agreements with compute customers, etc) without any disruption.

Loan Execution

Once the GPU has been tokenized, the Borrower is free to borrow directly from the USD.AI Protocol, using their Electronic Document of Title NFT as collateral. To execute the transaction, the Borrower posts their NFT collateral into the pool, withdrawing their loan in USDC. Then, the Borrower makes payments every 30 days to keep their loan current, according to the terms above (mid teens APR, 3 year principal amortization).

In the Event of Default

If Borrower fails to meet their loan payment requirements, (ie, interest & principal payment every 30 days, with one 30 day grace period at an accelerated APR), the Borrower would trigger an event of default. This will cause the NFT, which retains all rights to the underlying GPU, to be sold via auction. The new buyer of the GPU can then step into the Bailment Agreement between the Datacenter and Borrower, and reclaim the underlying asset for their own purposes or establish a new agreement with the Datacenter to continue warehousing the GPUs.

In the Event of Borrower Bankruptcy

If the Borrower parent goes bankrupt, the assets backing the loan are completely walled off from other creditors. The SPV has full separation from the Borrower and cannot be collpased back into the Borrower for other creditors to try to claim the tokenized GPUs as part of the bankruptcy process.