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Arc DeFi lend and borrow shows how to build a collateralized lending protocol on Arc. Users deposit cirBTC (a test ERC-20 token the sample app deploys to simulate a Bitcoin-backed asset) as collateral and borrow USDC against it. The protocol enforces a 50% loan-to-value ratio: depositing $100 of cirBTC lets you borrow up to 50 USDC. The app supports both MetaMask and Circle Modular Wallets through a unified wallet abstraction layer, following the Arc-specific USDC patterns described in Stablecoin native model.

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Preview

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Flow

1

Connect wallet

The user connects with MetaMask or a Circle Modular Wallet (WebAuthn passkey). A unified hook abstracts both wallet types for all contract interactions.
2

Mint cirBTC from the UI faucet

The user mints cirBTC test tokens directly from the app to use as collateral. USDC is used as native gas on Arc Testnet.
3

Approve and deposit collateral

The user grants an ERC-20 allowance to the LendingBorrowing contract, then deposits cirBTC. The contract locks the collateral for the duration of any active loan.
4

Borrow USDC

The protocol calculates the maximum amount the user can borrow at 50% of the deposited collateral value. The user borrows USDC up to that limit from the liquidity pool. Repayment equals the borrowed amount; this implementation does not accrue interest.
5

Repay loan

The user repays the borrowed USDC in full. Only after full repayment can collateral be withdrawn.
6

Withdraw collateral

With no active loan, the user withdraws their cirBTC collateral back to their wallet.
This reference implementation omits two features common in production lending protocols: liquidation (no mechanism removes positions with insufficient collateral) and interest accrual (repayment equals the borrowed amount). Add both before using this as a production foundation. The USDC liquidity pool must also be funded before users can borrow; the deployment script seeds an initial pool balance.