ABOUT OUR LENDING PROTOCOL
Last updated
Last updated
UnityCore Protocol is a decentralized protocol built on Core chain. our Lending protocols will allow you to supply funds and receive an annual yield in return. Besides depositing, our Protocol will allow you to borrow tokens against your deposited tokens as collateral. We are building a peer-peer lending through a smart contract enebled pool where lenders can make deposit in exchange for intrest payments, and borowers can take out loans in exchange for paying intrest. To borrow crypto from our Unity pool, you first need to make a deposit. we allow one to take out loans in a different cryptocurrency than you deposited. Loans on UnityCore Protocol are overcollateralized, which means you must deposit 120% of the value you are looking to borrow
Building a lending protocol and operating it savely is a huge challenge. with respect to this, at the start we will not push all the features of the protocol to the community, we will be releasing it gradually till we bring all the exciting features to our protocol.
We have carefully examine the risk parameters, which includes:
1). LIQUIDATION THRESHOLD: This is the percentage at which a loan is defined as undercollateralised. I.e a Liquidation threshold of 70% means that if the value rises above 70% of the collateral, the loan is undercollateralised and could be liquidated.
2). COLLATERALS: Our Protocol will not use USDT or any stable coin as collateral, incase they lose their bags to US Dollar. We have discussed and considered about the risk of staking Stable coin as our collatorial because it is strongly exposed to the risk of single point of failure in their governance. Therefore our Protocol for now will use Core as collateral, while using UCORE token and ICE token for borrowing. We will add more borrowing tokens as we proceed.
3). VOLATILITY: Our protocol liquidations thresholds are set at 70% to protect our users from a sharp drop in price which could lead to undercollaterisation followed by liquidation.
4). MARKET CAPITALISATION: we put this into consideration because this is important and this can bemitigated through the liquidation parameters. The smaller the market cap, the higher the incentives. This represent the size of the market which is most important!
5). LOAN TO VALUE: Borrowers will be able to borrow up to 70% of the corresponding currency. please note that once a loan is taken, the loan to value evolves with the market conditions.
6). HEALTH FACTOR: Though this involved a little mathematics formula.
Collator al in core x liquidation threshold / Total borrow in core and total fee
When the loan is undercollaterised, it may be liquidated to maintain solvency which is great.
The limit on how much one can borrow is 1/3 which is 33% of the liquidity a token has across all DEXes.
The maximum amount you can borrow depends on the value you have supplied and the available liquidity. For example, you can’t borrow an asset if there is not enough liquidity or if your health factor doesn’t allow you to.
There is no fixed time period to pay back the loan. As long as your position is safe, you can borrow for an undefined period. However, as time passes, the accrued interest will grow making your health factor decrease, which might result in your deposited assets becoming more likely to be liquidated.
A lender receive continuous earnings that evolve with market conditions based on: The interest rate payment on loans - suppliers share the interests paid by borrowers corresponding to the average borrow rate times the utilisation rate. The higher the utilisation of a reserve the higher the yield for suppliers.
You can supply any amount you want, there is no minimum or maximum limit. Still, it's important to take into account that for really low amounts it is possible that the transaction cost of the process is higher than the expected earnings. It is recommended that you consider this when supplying very low amounts.
A liquidation is a process that occurs when a borrower's health factor goes below 1 due to their collateral value not properly covering their loan/debt value. This might happen when the collateral decreases in value or the borrowed debt increases in value against each other. This collateral vs loan value ratio is shown in the . In a liquidation, up to 50% of a borrower's debt is repaid and that value + liquidation fee is taken from the collateral available, so after a liquidation that amount liquidated from your debt is repaid. Example, If one deposits 20 CORE and borrows 10 CORE worth of UCP or ICEToken. If his Health Factor drops below 1 his loan will be eligible for liquidation. For one to avoid liquidation he can raise your health factor by depositing more collateral assets or repaying part of your loan. By default, repayments increase your health factor more than deposits. Also, it's important to monitor your health factor and keep it high to avoid a liquidation. Keeping your health factor over 2, for example, gives you more of a margin to avoid a liquidation. Borrowing
The health factor is the numeric representation of the safety of your deposited assets against the borrowed assets and its underlying value. The higher the value is, the safer the state of your funds are against a liquidation scenario. If the health factor reaches 1, the liquidation of your deposits will be triggered. The health factor depends on the liquidation threshold of your collateral against the value of your borrowed funds.
