Supplying & Borrowing
Last updated
Last updated
The Bank is a peer-to-peer, decentralized, autonomous token lending/borrowing smart contract where users can participate as suppliers or borrowers. Suppliers provide liquidity to the market to earn a passive income, while borrowers are able to borrow in an overcollateralised (perpetually) or undercollateralised (one-block liquidity) fashion.
To do so, navigate to the "Supply" section and click on "Supply" for the asset you want to supply. Select the amount you'd like to supply and submit your transaction*. Once the transaction is confirmed, your supply is successfully registered and you begin earning interest.
Tokens holders receive continuous earnings that evolve with market conditions based on:
The interest rate payment on loans - suppliers share the interests paid by borrowers corresponding to the average borrow rate times the utilisation rate. The higher the utilisation of a reserve the higher the yield for suppliers.
Each asset has its own market of supply and demand with its own APY (Annual Percentage Yield) which evolves with time. You can find the average annual rate over the past 30 days to evaluate the rate evolution, and you can also find more data on the reserve overview of each asset in the home section on the app.
There is no mininum supply amount. Still, it's important to take into account that for really low amounts it is possible that the transaction cost of the process is higher than the expected earnings. It is recommended that you consider this when supplying very low amounts.
A feature called the Supply Cap has been introduced on Injera. If a reserve has a supply cap, this limits the total amount of the asset that can be supplied. Current parameters and reserve states can be viewed on our live dashboard.
Injera leverages C2C borrowing using smart contract systems to 'borrow' tokens from the Bank on a contract-to-contract ("C2C") basis.
C2C Borrowers do not need to overcollateralize their loans from the Bank with matching deposits--instead, due to pre-programmed compatibility between the Bank and a liquidation engine for the borrowing smart contract system, the Bank holds an indirect, virtual 'smart lien' on the borrowed tokens. Because of this, the borrowed tokens can be liquidated from the C2C Borrower and the proceeds of that liquidation paid to the Bank to maintain the Bank's solvency.
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 need to supply any asset to be used as collateral. After this, simply head to the Borrow section and click on “Borrow” for the asset you want to borrow. Set the amount you need based on your available supplies that would be used as a collateral for the loan. Select either stable or variable rate and confirm your transaction. You can always change your rate afterwards as many times as you want.
The maximum amount you can borrow depends on the value you have supplied 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 repay your loan in the same asset you borrowed. For example, if you borrow 1 ETH you will pay back 1 ETH + interest accrued. You can also use your collateral to repay. If you want to pay back the loan based on USD price you can do so via USDT.
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 on Injera. The stable rate, as its name indicates, will remain pretty stable and it is the best option to plan how much interest you will have to pay. The variable rate will change over 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.
The primary C2C Borrower from Banks will be the Credit Manager smart contract, through its user-specific credit accounts. Creds are machines that superpower your crypto holdings. Simply deposit tokens, and you automatically get a credit line to borrow more assets to leverage (or hedge) any position. As a result, Injera is likely to see more borrowing demand from new leveraged activities, such as margin trading and leveraged farming. This could also mean higher returns for lenders.
