Borrowing

You can choose to use your deposited assets as collateral to borrow against a certain range of assets with variable interest rate. The variable interest rate and the maximum can be borrowed depend on the type and the utilization of the asset. All available collaterals and specific parameters for borrowing can be found in Risk Parameters.

You need to repay the same amount and type of borrowed asset before you can withdraw the deposited collateral. For instance, if you borrow 1000 WASTR, and the accumulated interest over 3 months is 10 WASTR, you will have to repay 1010 WASTR.

FAQ

What are the benefits of being a borrower?

There are mainly two benefits of being a borrower, depending on how you view the market conditions and the price trend of an asset. Say, the asset you care about is WASTR.

• If you think the market is going down and WASTR price is going to drop (as in most bear markets), you can deposit stablecoins (e.g. BAI, USDC, and etc.) to borrow WASTR, and sell the WASTR you borrowed on DEXes. When WASTR price drops, you can get some profit by repaying the loan with a lower dollar value at a later stage.

• If you think the market is going up and WASTR price is going to rise (as in most bull markets), you can deposit WASTR to borrow stablecoins (e.g. BAI, USDC, and etc.), and buy WASTR on DEXes, to create more exposure to WASTR (aka. leverage). When WASTR price rises, you get more gains.

Despite of using borrowing upon market ups and downs, borrowers using SiO2 Finance can also earn a reward APR with $SIO2 tokens as incentives.

What is the borrow interest rate?

Currently, SiO2 Finance only supports variable interest rate, which is dynamically dependent on the utilization rate of each asset. Fixed-rate borrowing is not enabled for the initial launch. For future updates, please refer to this section.

What is health factor?

Health Factor (aka. HF) is a metric that tells you the safety of your deposited position relative to your borrowed position. The higher the value, the safer the deposited assets are against liquidation. When HF decreases and becomes less than 1, your asset may be liquidated; if HF<1, the collateral value versus borrowing may be reduced by up to 50%, depending on various factors. The calculation of HF depends on the liquidation threshold of your collateral and borrowed assets, which can be found in Risk Parameters.

What is liquidation?

A liquidation is a process that occurs when a borrower's HF 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 health factor. 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.

What is liquidation penalty?

The liquidation penalty (or bonus for liquidators) depends on the asset used as collateral. You can find every assets' liquidation fee in the risk parameters section.

How can I avoid being liquidated?

To avoid liquidation, you 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. You should be mindful of the stablecoin price fluctuations due to market conditions and how it might affect your health factor. For example, the market price of USDC 1.00 might not equal exactly USD 1.00, but for example USD 0.95. The price fluctuations of stablecoins, like any assets, affects your health factor. You can find more details of price oracles in the price discovery section.

Who can initiate the liquidation?

Liquidations are open to anyone, but there is a lot of competition. Normally liquidators develop their own solutions and bots to be the first ones liquidating loans to get the liquidation bonus.