# 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.

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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.
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<figure><img src="https://1590734653-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FUz9H2yEvvJUXv6c07FqW%2Fuploads%2FSqVJCDB5xIdEEpyND1uC%2FBorrow%20FTL%202.svg?alt=media&#x26;token=9ac15bbc-d623-4350-9dd8-09541c043417" alt="" width="488"><figcaption></figcaption></figure>

### 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%&#x20;
* 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%&#x20;
* 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.

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Borrowing is not permitted within the buffer range. [<mark style="color:purple;">The buffer range</mark> ](https://nitro-finance.gitbook.io/ftl/protocol-overview/protocol-maths#buffer-range)is a protected zone around the active price, designed to preserve liquidity and prevent excessive borrowing
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## BORROW ARCHITECTURE

<figure><img src="https://1590734653-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FUz9H2yEvvJUXv6c07FqW%2Fuploads%2F1xmivynLINSICUi5Zmxe%2FBorrowing%20Architecture%201.svg?alt=media&#x26;token=e2c1089b-258f-4de1-844f-6f5163a75c8b" alt=""><figcaption></figcaption></figure>