Borrowing
After depositing to Curvance, you will have the ability to borrow stablecoins. You can borrow against your deposited assets and use them as collateral. Curvance provides a solution for users who have locked their capital to earn and boost their yields on platforms like Curve, Yearn, or Convex. Users now have the opportunity to unlock a portion of their deposited positions, creating capital efficiency and leverage opportunities.
There are many reasons why users may want to do this. Perhaps you would like to use your unlocked capital to reinvest and earn additional yield, further boosting your already boosted rewards. Maybe you'd like to take out loans to use and spend without selling your appreciating, yield-bearing assets. Or reinvest borrowed capital to buy more staked assets redepositing them back into the protocol, effectively leveraging your position. Regardless of your use case, Curvance opens the door to a wide range of new possibilities and strategies for you to take advantage of.
The mechanics for calculating the interest rate for borrowing available assets are essentially the same as outlined in the Lending section.
TLDR: The borrowing interest rates are based on the interest rate curve and utilization of the pool. The borrowing interest rate hikes after 80% utilization of the pool.
NOTE: The borrowing interest rate for a pool is always flat (APR).
Borrowers must over-collateralize their positions when borrowing to ensure the borrowed assets are returned. The loan-to-value ratio (LTV) of the particular assets you supply determines the maximum amount of tokens in the pool that can be borrowed from the protocol. Let's say you are supplying cvxCRV to a pool with an LTV of 45%. For every cvxCRV you deposit as a lender, you can borrow 0.45 cvxCRV worth of stablecoins in the pool. These stablecoins are now yours to spend as you wish.
Besides that, pool utilization is a limiting factor of your borrowing limit. You cannot borrow more if all of the pool is being utilized.
Curvance will utilize a dual oracle design to increase protocol security exponentially. The oracles used will vary between Chainlink, Curve, UniV3, Velodrome, Pyth Network, and more. In calculating an asset's price, the most favorable price to the protocol will always be used to maximize protection to stablecoin lenders.
For example, if one oracle reports a price of $100 and the second oracle reports a price of $101, a user borrowing against their assets will be able to borrow with a collateral value of $100. If the user is at risk of liquidation, the stablecoin they are borrowing against has oracle prices of $1 and $1.01; it will compare their position against a price of $1.01. If the prices from both oracles diverge due to manipulation or market volatility, borrowing may be paused on the asset until the oracle prices converge again, preventing potential attacks against the protocol. Similarly, if a collateral assets price makes a larger-than-average move, that particular lending market could be paused to prevent things like flash loan attacks.
If the price of a user’s collateral decreases to below the collateral amount * LTV, their position will be subject to liquidation. If this happens, supplied collateral will be sold to repay enough of their loan until the borrowed amount no longer exceeds the borrowing limit. As with nearly all assets in DeFi, users should expect and prepare for volatility. This makes it essential to carefully monitor one’s health bar and borrow carefully within the borrowing limit.
The underlying pools do not run automated liquidations. Instead, the system is based on a thriving community of liquidators who are incentivized by receiving part of the collateral.
NOTE: Please be aware of the fact that an account can not only go underwater by the collateral's value decreasing more than the value of the borrowed asset but also by the borrowed asset's value increasing more than the collateral's.
Last modified 2mo ago