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Auto-Rolling

Overview​

Tenor offers users an auto-renewal smart contract to simplify the renewal process and minimize the likelihood of the user getting liquidated at maturity.

When enabled, the contracts enables any third party (e.g. lender) to renew a borrower’s position forward in a longer dated term seamlessly, removing the need for manual repayment or monitoring. The contracts also enable the renewal at a variable rate using an open term market.

If auto-rolling is disabled and the user fails to repay the position by maturity, collateral equivalent to the amount owed is liquidated to settle the debt.

Renewal Mechanism​

At maturity, if auto-renewal is enabled, the position can be extended into a later-maturity fixed-rate market programmatically. The Tenor smart contract runs an auction before maturity enabling any third party to roll the user’s position in a longer dated term. The user can set different renewal policies. Policies run auctions to renew positions at the best available rate up to a user set maximum rate.

Fixed Term, Fixed-Rate Renewal​

By default, positions renew into a later-maturity fixed-rate market based on the user’s renewal policy. To secure the best rate, Tenor contracts run an auction six hours before maturity.

Renewal Policies

Users can customize their fixed term renewal policy by specifying:

  • The auction type they want to run
  • The maximum renewal interest rate
  • The maximum renewal term length

Open Term, Variable-Rate Renewal​

If the fixed-rate renewal fails, due to lack of liquidity or the rate in the new term being higher than the user’s set preference, the position can be renewed into a corresponding Morpho variable-rate open term market.