Lending & Borrowing

Lender lends out idle crypto assets to earn interest payment from lending fee
Borrower deposits crypto assets as collaterals & pays borrowing fee to borrow assets
interest changes from time to time based on liquidity utilisation rate
most platforms require over-collateralisation, borrowers can only borrow up to a percentage (mostly 75-90%) of the loan-to-value (i.e. deposited collaterals)
force liquidation happens when the value of deposit assets are not enough to cover the assets borrowed

borrower deposits 10 ETH to borrow 7.5 ETH worth BTC (max LTV = 75%)
if the liquidation threshold is 80%, either the price of BTC raises or ETH drops, the value of borrowed asset worth more than 80% of the collateral will trigger liquidation
liquidator can liquidate an unsafe position
- liquidator sells borrowers's ETH collateral for BTC
- liquidator replays outstanding BTC debt & keep remaining collateral
- borrower keeps the borrowed asset & lost collateral in a loss
- this incentivises liquidator to maintain health of the protocol

Decentralised - no centralised entity, no approval required from 3rd party
Instant - instant loan with no delay & loan review
Transparent - can clearly trace how deposited assets are secured & used by the protocol
Trustless lending - borrowers' capital are protected by incentivised liquidation mechanism

Last updated 2 years ago

Lender lends out idle crypto assets to earn interest payment from lending fee
Borrower deposits crypto assets as collaterals & pays borrowing fee to borrow assets
interest changes from time to time based on liquidity utilisation rate
most platforms require over-collateralisation, borrowers can only borrow up to a percentage (mostly 75-90%) of the loan-to-value (i.e. deposited collaterals)
force liquidation happens when the value of deposit assets are not enough to cover the assets borrowed

borrower deposits 10 ETH to borrow 7.5 ETH worth BTC (max LTV = 75%)
if the liquidation threshold is 80%, either the price of BTC raises or ETH drops, the value of borrowed asset worth more than 80% of the collateral will trigger liquidation
liquidator can liquidate an unsafe position
- liquidator sells borrowers's ETH collateral for BTC
- liquidator replays outstanding BTC debt & keep remaining collateral
- borrower keeps the borrowed asset & lost collateral in a loss
- this incentivises liquidator to maintain health of the protocol

Decentralised - no centralised entity, no approval required from 3rd party
Instant - instant loan with no delay & loan review
Transparent - can clearly trace how deposited assets are secured & used by the protocol
Trustless lending - borrowers' capital are protected by incentivised liquidation mechanism

Last updated 2 years ago