Selling your assets means closing your position on that particular asset. Hence, if you are long on the asset, you would not be entitled to the potential upside value gain. By borrowing, you are able to obtain liquidity (working capital) without selling your assets. Users are mainly borrowing for unexpected expenses, leveraging their holdings or for new investment opportunities.
Before borrowing you must hold one of the assets listed in the M1 tab. Go to M1 and click on “Deposit” next to an asset you are holding to deposit your collateral. Then, click on “Borrow” next to the asset you want to borrow and confirm your transaction. Note that assets supplied on the M0 tab can also be used as collateral.
The maximum amount you can borrow depends on the value you have deposited 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. You can find every collateral available and its specific parameters for borrowing when you click on “borrow”. Your borrow limit and loan risk are also shown in “M0”.
You repay your loan using the same asset you borrowed. For example, if you borrow 1 ETH you will pay back 1 ETH + interest accrued.
Stable rates act as a fixed rate in the short-term, but can be re-balanced in the long-term in response to changes in market conditions. The variable rate is the rate based on the offer and demand in Themis. The stable rate, as its name indicates, will remain stable and it's the best option to plan how much interest you will have to pay. The variable rate will change over the time and could be the optimal rate depending on market conditions. You can switch between the stable and variable rate at any time through your dashboard.
No, you can only borrow using either a stable rate or variable rate for one asset.
The interest rate you pay for borrowing assets depends on the borrowing rate. This is derived from the supply and demand ratio of the asset. Moreover, the interest rate changes constantly. You can find your current borrowing rate at any time in the ‘Borrow Markets’ section of your dashboard.
Themis 2.0‘s interest rate algorithm is calibrated to manage liquidity risk and optimize utilization. The borrow interest rates are derived from the Utilization Rate (U).
U is an indicator of the availability of capital within the pool. The interest rate model manages liquidity risk in the protocol through user incentives to support liquidity:
When capital is available: low interest rates to encourage borrowing.
When capital is scarce: high interest rates to encourage repayments of debt and additional supplying.
See below for more details:
Stable rate rebalance is expected to be unlikely, but will happen if the average borrow rate is lower than 25% APY and the utilization rate is over 95%.
To switch your interest rate between stable and variable rate, simply browse to your dashboard and click on buttons under the “Borrow APY Rate” for the asset you wish to apply the rate change.
The loan risk is the numeric representation of the safety of your deposited assets against the borrowed assets and its underlying value. The lower the value is, the safer the state of your funds are against a liquidation scenario.
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, which might result in your deposited assets becoming more likely to be liquidated.
In order to pay back the loan you simply go to the Borrowing section of your dashboard and click on the ‘Repay’ button for the asset you borrowed and want to repay. Select the amount to pay back and confirm the transaction.
In order to avoid the reduction of your loan risk leading to liquidation, you can repay the loan or deposit more assets in order to decrease your loan risk. Out of these two available options, repaying the loan would decrease your loan risk more.
In order to repay with your assets, go to your Dashboard and follow these steps:
- Click on repay for the debt you want to repay.
- Choose repay "With your current collateral"
- Select the asset you want to repay and the amount on the left side (Borrowed Asset).
- Select the asset you want to use to repay to in the right side (Select Collateral)
- Make sure to check the swap rate and check the slippage. You can edit it based on your preferences. Depending on the slippage, the expected might differ and the transaction might even fail if you set it too low. After this click on Continue.
- In the next step you need to send the approval and submit the transaction. The approval transaction will only be required the 1st time you do this step, unless you revoke the approval.
- Make sure to have enough ETH for the transaction cost. After sending both transactions your repayment will be done.