Borrowing

The Fused Trade Ledger (FTL) enables users to borrow inactive liquidity by selecting a price bin either below or above the current market price (active bin).

• Borrowing Below Market Price: The user borrows the inactive quote asset (Y), using the base asset (X) as collateral, by selecting a bin below the current market price.

• Borrowing Above Market Price: The user borrows the inactive base asset (X), using the quote asset (Y) as collateral, by selecting a bin above the current market price.

When a borrowing transaction is executed, the borrower receives a debt NFT—a verifiable record that simplifies tracking and management of their position within the protocol.

Example 1: Borrowing Below Market Price

Borrowing below the market price is akin to selling NAD for USDC at a lower-than-market price. The borrower selects a bin below the active market price to collateralize NAD, receiving USDC and reserving the right to repurchase NAD at the borrow bin price within a set borrowing term (e.g., 7 days).

• current market price: 1500 USDC/NAD

• borrow bin price: 1000 USDC/NAD

• borrow fee: 0.3%

• collateral size: 1 NAD

to receive; 997 USDC = $(\text {collateral size} \times \text {borrow price})-\text{borrow fee}$

Example 2: Borrowing Above Market Price

Borrowing above the market price is akin to buying NAD with USDC at a higher-than-market price. The borrower selects a bin above the active market price to collateralize USDC, receiving NAD and retaining the option to sell it back at the borrow bin price within the borrowing term (e.g., 7 days).

• Current market price: 1500 USDC/NAD

• borrow price: 2000 USDC per NAD

• borrow fee: 0.3%

• collateral size: 3000 USDC

To receive: 1.495 NAD =$(\dfrac {\text{collateral size}} {\text{borrow price}})-\text{borrow fee}$

Key Features of Borrowing

• Dynamic Collateralization: Borrowing capacity depends on the price of the selected bin.

  • If Bin Price = 1300 USDC/NAD, you can:

    • Borrow 1300 USDC for 1 NAD collateral, or

    • Borrow 1 NAD for 1300 USDC collateral.

  • If Bin Price = 1000 USDC/NAD, you can:

    • Borrow 1000 USDC for 1 NAD collateral, or

    • Borrow 1 NAD for 1000 USDC collateral.

• No Liquidation Risk

  • Positions are not subject to liquidation. Instead, any unpaid debt expires after 7 days, with collateral absorbed into the pool.

• Simple, Predictable Fees

  • Fees are transparent and fixed, with no fluctuating APYs or hidden costs.

• Liquidity-Dependent

  • Borrowing relies on the availability of inactive liquidity in targeted bins. Limited liquidity may restrict the amount available for borrowing.

• Fixed-Term Borrowing

  • Borrowing positions have a 7-day expiry, requiring repayment or rollover within this period.

Borrowing is not permitted within the buffer range. The buffer range is a protected zone around the active price, designed to preserve liquidity and prevent excessive borrowing

BORROW ARCHITECTURE