⚡Smart Contract Flow

Trust scores are calculated off-chain using the algorithm in the previous section. The smart contracts handle money movement, not social graph analysis. This keeps gas costs low (Base L2 fees are ~$0.01 per transaction).

Contract Interfaces

IMicroLoanFactory.sol

interface IMicroLoanFactory {
    function createLoan(
        address borrower,
        string calldata metadataURI,
        uint256 principal,
        uint256 loanDuration,
        uint256 fundraisingDeadline
    ) external returns (address loanAddress);
}

Deploys individual loan contracts with validation constraints

IMicroLoan.sol

interface IMicroLoan {
    function contribute(uint256 amount) external;
    function disburse() external;
    function repay(uint256 amount) external;
    function claimableAmount(address contributor)
        external view returns (uint256);
    function claim() external;
}

Core loan lifecycle: fundraising → disbursement → repayment → claims

Loan Lifecycle

1. Loan Deployed via Factory

function createLoan(
    address borrower,
    string calldata metadataURI,
    uint256 principal,
    uint256 loanDuration,
    uint256 fundraisingDeadline
) external returns (address loanAddress)

Constraints:

• Minimum principal: P_min = $100

• Loan duration: 7 days ≤ D ≤ 365 days

• Disbursement window: 14 days after funding

• Restriction: One active loan per borrower

Each loan gets its own smart contract with parameters: principal P, maturity date T_maturity, borrower address, and verified Farcaster ID.

2. Lenders Contribute

function contribute(uint256 amount) external

Lenders send funds to the contract. Each contribution updates:

C_lender ← C_lender + amount
R_total ← R_total + amount

Where:

• C_lender = cumulative contribution from this lender

• R_total = total raised across all lenders

Trust scores are calculated off-chain and displayed in the UI. The contract only tracks capital flow.

3. Funds Disbursed to Borrower

function disburse() external

Once fully funded, borrower can claim funds within the disbursement window:

Conditions:

1. R_total ≥ P (fully funded)

2. T_current ≤ T_deadline + 14 days

3. Funds not yet disbursed

Action: Transfer R_total to borrower

4. Repayment & Claims

function repay(uint256 amount) external

function claimableAmount(address contributor)
    external view returns (uint256)

function claim() external

Borrower repays flexibly. Lenders claim their pro-rata share using an accumulator pattern for gas efficiency.

On Each Repayment:

A ← A + (r × k) / P

Where:

• A = accumulator (tracks total repaid per $1 of principal)

• r = repayment amount

• k = precision constant (10^18)

• P = original principal

Claimable Amount per Lender:

Claimable = (C_lender × A) / k − D_lender

Where:

• C_lender = lender's contribution

• D_lender = amount already claimed by lender

• Result is proportional to contribution share

This approach calculates pro-rata shares in O(1) time per lender, rather than iterating over all lenders. Overpayments automatically distribute as bonuses.

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Tipping on Repayment

Borrowers can express gratitude by repaying more than the principal amount. The smart contract automatically distributes tips proportionally among all lenders.

How it works:

// Borrower repays $110 on $100 loan
repay(110); // $10 tip automatically distributed

// Each lender receives: (contribution / principal) × total_repaid
// Lender who gave $30 receives: ($30 / $100) × $110 = $33 ($3 tip)
// Lender who gave $70 receives: ($70 / $100) × $110 = $77 ($7 tip)

The accumulator pattern handles this automatically—any repayment amount distributes proportionally, whether it's 50%, 100%, or 110% of principal.

Pro Tip: Tips strengthen your reputation and show gratitude to supporters. Even small tips (5-10%) signal reliability and appreciation.

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Gas Optimization

The accumulator pattern is crucial for scalability:

Approach	Gas Cost per Lender	Gas for 100 Lenders
Accumulator (Our Method)	~40,000 gas	~40,000 gas
Iterate All Lenders	~40,000 gas	~4,000,000 gas

With Base L2 gas at ~$0.01 per 40,000 gas, our method keeps costs constant regardless of lender count.

Security Considerations

• Reentrancy Protection: All external calls use nonReentrant modifier

• Access Control: Only borrower can disburse funds

• Overflow Protection: Solidity 0.8.20 has built-in overflow checks

• Fixed-Point Math: 10^18 precision prevents rounding errors

Contract Addresses

Base Mainnet

• MicroLoanFactory: [TO BE DEPLOYED]

• USDC Token: 0x833589fCD6eDb6E08f4c7C32D4f71b54bdA02913

Base Sepolia (Testnet)

• MicroLoanFactory: [CHECK REPO]

• Test USDC: [CHECK REPO]

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Next: Learn how Social Trust Scoring enables uncollateralized lending