Borrowing

To make the borrowing more attractive to the users and draw more people to the platform, AvaxFi will provide 85% loan-to-collateral rate for WETH-WBTC and 65-85% for other prominent altcoins. The rates are currently 10% more than other major DeFi platforms. The borrower will deposit a cryptocurrency/token to the platform, and in return, the borrower will be able to obtain a loan corresponding to a maximum of 85% of the collateral. The loan can be in the same token as the collateral or in another. The borrower will then be able to send and use the loan. The interest for the loan will be calculated on an hourly basis and will be in the loan currency. The borrower can at any time pay the loan back together with any due interest.

If the borrower does not pay the interest amount on time (like daily), an additional late payment fine will be added to the daily interest amount. In case, the amount will be charged from collateral. If the daily interest amount reaches 50% of the remaining available collateral, the collateral will be liquidated, and the loan will be settled. For example, if the borrower deposits WBTC as collateral, the borrower can receive the loan in any other token on the platform. The loan amount will correspond to 80-85% of the deposited WBTC’s USD value. In other words, if the borrower deposits 100 USD value WBTC, then this borrower can obtain a loan in any other token, which will correspond to 80-85 USD. If the USD value of collateral becomes lesser, equal, or close to the USD value of the loan, then the collateral will be liquidated, and the loan will be settled.

The liquidated collateral will be converted into loan tokens and transferred back to the token pool. In this general structure, the collateral factor will affect the loan size. The “quality” of deposited tokens such as WBTC or WETH will correspond to 80-85% of the loan rate. If the deposited token is in other altcoins, the loan rate will become 65-70%. Currently, the DeFi market generally offers 75% for ETH-BTC (WBTC-WETH), and 65% for other altcoins.

The other major factor affecting loan size will be the size of the token pool from which the borrower would like to obtain a loan. If the pool is small compared to other pools, then interest fees will increase for the loan. Moreover, a percentage limit (loan-to-pool size percentage) can be set to prevent the pool's depletion and provide an extra protection layer against future attacks. If the collateral and loan are the same tokens, then the loan-to-collateral ratio can be set to 85% for all coins.