Pool Parameters
Here are some parameters when you do lending/borrowing on our Dapp
It is the expected yearly interest to be paid by a borrower or the expected yearly yield received by the lender.
Example - Let's say, we have a USDC-MATIC pool with a maturity of 1 month. If a lender lends 1000 USDC at 24% APR or 24%/12 per month, then the lender will receive
1000 + {24%/12}x1000 = 1020 USDC at maturity.
For a borrower, if they borrow 1000 USDC at 24% APR, they need to repay 1020 USDC before maturity or their collateral will be forfeited.
NOTE: You earn/pay APR only for a time period between your transaction and the maturity of the pool. This means, if a pool has 1 year of maturity and you borrow/lend one month before maturity, then you pay/earn APR only for a time period of 1 month.
For a borrower, it is the amount of collateral tokens locked per unit of asset token borrowed. For a lender, it is the collateral coverage per unit of asset lent.
Example - Consider a USDC-MATIC pool. For a borrower, to borrow 1000 USDC from the pool at 125% CDP, they need to lock MATIC collateral worth $1250.
Collateral to lock = 125/100 x 1000 = 1250 USDC
For a Lender, if they lend 1000 USDC in the pool at 125% CDP, they get MATIC insurance worth USDC1250.
If the borrowers don't repay, lenders receive a proportional claim of the collateral.
It is the maximum interest rate that a lender/borrower can get, given they have a higher risk profile.
Example - Let's say a lender wants relatively high returns at maturity. They can do so by going for the 'Max APR', which reduces their collateral coverage. Lending at 12% APR might give them 120% CDP(or insurance). And lending at Max APR, say 24% APR might give them only 105% CDP. Less insurance means more risk, hence the possibility of getting high returns.
It is the minimum collateral per unit asset token being lent/borrowed.
Example -Let's say a borrower wants to borrow tokens by locking less collateral. They can do so by going for Min CDP. This is because the pool parameters are customizable. If you want to lock less collateral, you need to repay a High APR. Pool Min CDP is when a borrower chooses the highest APR.
It is equal to the principal plus interest to be received at maturity.
Example -Consider a USDC-MATIC pool with 1-month maturity.
If you lend 1000 USDC at 24% APR, Your 'Amount to receive' will be = Principal + Interest = 1000 + {24%/12 of 1000} = 1020 USDC
It is equal to the collateral amount that a lender gets in case of a 100% default on the amount a lender is supposed to receive.
Example -Consider a USDC-MATIC pool, Assume MATIC's price to be $1.50. Let's say you lend 1000 USDC with 150% CDP, then your 'Amount protecting' will be $1500 worth of MATIC i.e. 1000 MATIC.
The total transaction fee is the duration between the initiation of the transaction to the maturity of the pool, multiplied by the transaction fee per second. The transaction fee is equal to 𝑓𝑑 of principal, where 𝑑 is the duration of the pool at the time of transaction. Lenders will pay 𝑓𝑑 of principal, thus decreasing the bond they will receive. Borrowers will pay 𝑓𝑑 of principal as well, thus increasing the debt they have to pay. The value of 𝑓 is chosen and fixed at the deployment of the factory contract.
Transaction fee= 5/6 x fd of principal
Example - If the Principal or Transaction value= 1000 USDC
f = 1.5% = 0.015 per year = 0.015/31536000 per sec
d = 7 days = 604800 seconds
Transaction fee = 5/6 x 0.015/31536000 x 604800 x 1000 = $ 0.23972
The total protocol fee is the duration between the initiation of the transaction to the maturity of the pool, multiplied by the protocol fee per second; therefore, the total fee that lenders and borrowers pay is the sum of transaction fee and protocol fee.
Protocol fee = 1/6 x fd of Principal
Example - If the Principal or Transaction value= 1000 USDC
f = 1.5% = 0.015 per year = 0.015/31536000 per sec
d = 7 days = 604800 seconds
Protocol fee = 1/6 x 0.015/31536000 x 604800 x 1000 = $ 0.04794
To simplify user experience for lenders and borrowers, the 'Recommended' feature keeps them in the middle of the Risk/Return while transacting.
For Lenders: In the “Recommended” lending model to simplify the user experience, we have kept the interest to insurance token ratio at 50/50 which means you are in the middle of the risk & return profile. For Borrowers: In the “Recommended” borrowing model to simplify the user experience, the collateral value is calculated based on a default 50/50 ratio of debt vs collateral. Borrowers have the option to pay back debt anytime before maturity without the risk of getting liquidated.
The 'Advanced' feature is for users who want to customise their Risk/Return.
Lenders can increase their APR by accepting less Insurance and vice versa. Borrowers can borrow at low APR by locking more collateral and vice versa.
Last modified 6mo ago