Official explanation of THORChain's new lending protocol, Lending.
Source: THORChain Blog
Translation: 0x711, BlockBeats
The decentralized cross-chain trading protocol THORChain has launched its lending protocol, Lending, today. The official claims that the lending protocol is "interest-free, non-forced liquidation, and no expiration date". THORChain team has provided a detailed explanation of the new protocol in their official blog, and BlockBeats has summarized and translated it as follows.
THORChain has activated its lending feature. Users can lend native Layer 1 assets - BTC and ETH - to THORChain and borrow a USD-denominated debt that has no liquidation, no interest, and no expiration date.
Loan Terms:
Interest-free
No Forced Liquidation
无到期日 translates to
No expiration date.
Loans are issued based on the collateralization ratio (CR), which determines the ratio of debt to collateral for the borrower. The CR can range from 200% to 500%, depending on market conditions.
Debts are priced in TOR, which is a stablecoin equivalent to the US dollar. Debts can be repaid with any asset supported by THORChain, including stablecoins.
The shortest term for a loan is 30 days. The borrower can repay the debt and retrieve the collateral at any time after 30 days. Partial repayment is allowed, but the collateral will not be released until the debt is fully repaid.
Currently, Lending supports ETH and BTC as collateral. In the future, Lending will open up to all Layer 1 assets supported by THORChain (BNB, BCH, LTC, ATOM, AVAX, DOGE).
Where to open, settle, and manage loans:
Dashboard
With the addition of more interfaces and dashboards, they will gradually increase.
Understanding Lending Design
Design Objective:
The main design goal of lending is:
1. The smallest cognitive burden - pursuing the simplest user experience for collateral, debt, and loan terms.
2. Expandable security - Collateral should always be protected.
3. Controlled Risk - The risk of excessively fast new debt growth should be limited, and the risk of existing debt exceeding system liquidity should be limited through transparent circuit breakers.
Basic Description:
THORChain uses Layer 1 assets as collateral to issue USD-denominated debt, holding the collateral as equity. The more collateral in relation to pool depth, the higher the collateralization ratio. A higher collateralization ratio means a safer system. Without liquidation or interest, users have no incentive to repay the loan, which increases the equity value of the protocol. By removing RUNE loans from the pool, THORChain can increase its total locked value (TVL), enhancing liquidity and security.
Community Resources:
除了借贷文档，THORChain community has also created a lot of resources to better understand the mechanisms and risks behind the lending protocol. Since the initial proposal in September 2022, certain aspects of the design have been adjusted - please note the old resources as they may reference outdated designs.
Internal Price Oracle - TOR Stablecoin
THORChain does not use any third-party pricing data, nor does it rely on any third-party. In order to not rely on any external stablecoin pricing unit, a stablecoin equivalent to the US dollar called "TOR" will be used as the internal pricing tool for the lending protocol.
TOR cannot currently be held or traded. Its market value is 0. It is only used as a pricing tool for debt in lending agreements. The price of TOR comes from the median price of all stablecoins on THORChain, such as USDC, USDT, BUSD, LUSD, GUSD, USDP, DAI, etc. Even if one or more stablecoins are lost or collapse, TOR can still be priced correctly, as long as there is an available stablecoin pool to maintain the correct price.
In order to prevent protocol manipulation, the depth of the TOR virtual pool will fluctuate. When stablecoin volatility occurs, TOR will maintain appropriate pricing, but its virtual pool depth will shrink to protect THORChain. This means that if a borrower tries to open or close a loan, the slippage will be very high. For best results, it is recommended that users open and close loans on THORChain when volatility is low.
Yes, opening and closing loans during low volatility is the best time. To prevent price manipulation on the network, virtual pools will shrink in depth during high volatility, which means that liquidity fees may increase significantly. Managing loans during low volatility in THORChain will produce the best results. Patient borrowers will pay the lowest fees.
Can I always retrieve my full collateral?
Users can retrieve the full collateral when repaying the debt, minus the slippage-based liquidity fees incurred during the loan opening and settlement process. The fees are lower during periods of low volatility. During high volatility, the fees are higher due to the contraction of the virtual pool depth. Borrowers who are patient and willing to pay the fees will have the lowest costs.
When will there be more collateral options?
The lending agreement initially supported BTC and ETH. The lending function for all Layer 1 assets on THORChain is now available, and only requires validators to enable it through Mimir.
I can use which assets to repay debts?
Debts can be repaid with any asset supported by THORChain. The assets used to repay the debt will be sold and exchanged for TOR, as the debt is denominated in TOR.
Will lending use streaming swaps?
There is currently no plan to use streaming swaps in loan agreements.
Why is there no settlement?
In this design, if the collateral is worth less than the debt, it is not a problem because the collateral (stored as RUNE equity) is the debt. The debt only grows when the RUNE asset price falls and the loan is repaid. Liquidating collateral poses a risk to individual loans, damages the user experience, and contradicts the design goal of having users monitor the price of RUNE. Instead of liquidation, the protocol can tolerate a slight increase in RUNE supply (about 15 million or 3%) and then activate the circuit breaker to pause borrowing. Since the RESERVE bears the remaining collateral payments and the loan terms remain unchanged after the circuit breaker, the likelihood of a shock exit is lower.
Why is there no interest?
The interest generates income on the collateral, but it makes users more likely to repay the loan. THORChain's design works best when users choose long-term loans or never repay loans. 0% interest is very attractive, which means users are less likely to repay the loan because the principal remains unchanged. Users will pay fees based on slippage when entering or exiting positions, which increases the earnings of network participants and permanently burns RUNE.
Why is there no expiration date?
This agreement hopes to attract as much external capital as possible (such as BTC and ETH and other L1 assets), as it converts them into equity (RUNE IOU). For example, storing $1 billion in collateral means buying $1 billion worth of RUNE, minus the collateral ratio (if it totals 300%), the amount of RUNE sold (about $300 million), and the net buying pressure of $700 million. This $700 million storage equity is a liability, and THORChain does not want this liability to be required to be repaid because it has to sell RUNE. Therefore, there is no expiration date.
Lending 如何帮助 THORChain 扩展?
How can Lending help THORChain expand?
THORChain has strict rules on economic security. The value of the validator's stake must always be greater than the value of the assets stored in the treasury, priced in RUNE. Due to the liquidity and savers that the protocol has, the network may maximize the pooling of RUNE and send all profits to the nodes. Before the protocol can add RUNE to the public debt module, it stops expanding, but this takes time. The lending and borrowing design buys and burns RUNE from the pool, directly affecting the relationship between liquidity and security. When opening a loan, it reduces the net amount of RUNE in the pool, allowing more TVL to enter. It also buys RUNE, allowing security to increase, so the network can safely store more external capital.
Who is the counterparty for loans?
THORChain protocol and all RUNE holders are counterparties to each loan. The RUNE burning/minting mechanism means that there is a concentration/dilution effect on all RUNE holders when loans are opened and settled. Liquidity providers and savers do not directly lend assets to borrowers. The pool is merely a medium of exchange between collateral and debt. Savers and liquidity providers also directly benefit from the liquidity fees earned from these exchanges.
原文链接 translates to
Welcome to join the official BlockBeats community:
Telegram Subscription Group: https://t.me/theblockbeats
Telegram Discussion Group: https://t.me/BlockBeats_App
Official Twitter Account: https://twitter.com/BlockBeatsAsia
