Pundle is a decentralized lending protocol built on Arbitrum that empowers borrowers to protect their collateral from sudden liquidations. By leveraging an option-based mechanism, Pundle allows users to hedge against market volatility, ensuring that their positions remain safe even during sharp price movements. The protocol integrates seamlessly with lending and borrowing markets, providing a gas-efficient, trustless, and fully on-chain solution for risk management in decentralized finance

Option-Based Loan Protection. Borrowers can protect their positions from liquidation by purchasing a small premium — essentially a fixed-term option — that secures the value of their collateral during a market downturn/sudden liquidation. When the collateral price falls toward the liquidation threshold, this protection kicks in and absorbs the price impact, preventing the position from being force-liquidated.

The cost of this protection (the premium) is calculated using the Black–Scholes option pricing model, a well-established financial formula that determines the fair price of an option based on market volatility, time to expiry, and the relationship between the collateral price and the liquidation threshold.

Pundle Smart Contracts

This directory contains the core smart contracts powering Pundle – the option-based, collateral-protected DeFi lending protocol.
The system is built using a dual-contract architecture:

1. Lending Contract – Handles deposits, borrowing, repayment, collateral, and protection logic.

2. Black–Scholes Pricing Engine – A high-precision option pricing module that is used to calculate the price of the premiums.

🏦 1. Lending Contract

Contract Address: 0xb686fDAfA06582de0792b18F64298dC5bcb78A3D

🧮 2. Black–Scholes Pricing Engine (Arbitrum Stylus)

Contract Address: 0xe924cf374ea3fc5a88ef243949e92de0c00b6f40

Black-Scholes Put Option Calculator

A Rust smart contract on Arbitrum Stylus that calculates put option premiums for DeFi liquidation protection.

What this contract does:

This contract calculates the premium (price) for put options using the Black-Scholes model.

Put options protect borrowers from liquidation by paying out when collateral prices drop below a threshold. Example Use Case

Alice deposits 1 ETH (worth $2000) and borrows $1500 USDC Her liquidation threshold is $1800 She buys 7-day protection for $15 (the premium this contract calculates) If ETH drops to $1700, she gets paid out instead of being liquidated

This contract only calculates the premium - it doesn't store data, fetch prices, or handle payments.

Test Commands:

cast call $STYLUS_CONTRACT_ADDRESS \
  "computePutPremium(uint256,uint256,uint256)(int256,uint256)" \
  2000000000000000000000 \
  2000000000000000000000 \
  19178082191780000 \
  --rpc-url $RPC_URL

DeFi Input Example with 18 Decimal Places

In Ethereum and many DeFi protocols, numeric inputs are often represented using 18 decimal places (also called wei precision). This is important for accurate calculations when dealing with tokens and prices.

Below is an example table showing how to convert actual values into 18-decimal format:

Explanation

• Collateral Price / Strike Price: Multiply the actual USD value by 10^18 to convert it into the 18-decimal format used by smart contracts.

• Time: Convert days into years (divide by 365), then multiply by 10^18 to maintain precision for contract computations.

Notes

• Always use integer values in smart contracts; fractional numbers must be represented with 18 decimals.

• This avoids rounding errors in DeFi calculations like options pricing, lending, or swaps.

Outfput Formula:

Returns two values: (mantissa, scale)

Example:

Premium Increases when:

• Time to expiry is longer

• Collateral price is closer to strike price

• Option is in-the-money

Contract Deployed :

The Contract has been deplyed on the Arbitrium Sepolia

deployed code at address: 0xe924cf374ea3fc5a88ef243949e92de0c00b6f40
deployment tx hash: 0x4b63779b1fbdaf2aa7a11e1d62038d0cc48a15df25806a8e215602eea87fd874
contract activated and ready onchain with tx hash: 0x9d81f991d1d85624a001292118372f180208511246c7c019b8b77954a2daff4b