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.

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 = (collateral size×borrow price)borrow fee(\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 =(collateral sizeborrow price)borrow fee(\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.

BORROW ARCHITECTURE

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