Borrowing
Users may seek to leverage their existing assets to gain exposure to other investment opportunities without liquidating their positions. Borrowing against deposited assets in the NEIQW protocol allows users to retain ownership while accessing the liquidity needed for further investments.
Example: Consider Satoshi, who needs additional liquidity to diversify his investments but wants to hold onto his BNB tokens anticipating a rise in value. He can:
Deposit BNB into NEIQW as collateral.
Borrow USDt against his BNB.
Use the borrowed USDt for new investments.
Enabling Borrowing
To borrow, users must first deposit an asset that is accepted by the protocol as collateral. They must ensure the "Use as Collateral" option is activated within the "Supply" section of the interface.
The borrowing limit is contingent on the deposited value and the protocol’s liquidity. Borrowing is restricted by the available liquidity and the borrower's account health.
Process of Borrowing Assets
Navigate to the 'Markets' tab and select 'Borrow.'
Choose the desired asset type from the dropdown menu in the Borrow dashboard.
Specify the amount to borrow and confirm by clicking 'Borrow.'
Upon transaction confirmation, the borrowed sum is credited and begins accruing interest.
Collateral Factor
Each asset has a specific collateral factor that determines the maximum amount that can be borrowed against it within the protocol.
Loan Repayments
Repayments can be made via the Borrow dashboard:
Click 'Repay,' enter the amount, and confirm the transaction.
Repayments must be made with the same asset that was borrowed.
Repayment Period
NEIQW does not impose a fixed repayment period. As long as the borrower's health metric remains above 1, the loan can be sustained indefinitely. However, accruing interest could lower the health over time, increasing the risk of liquidation.
Avoiding Liquidation
To prevent liquidation, borrowers should monitor their health score and either repay part of the loan or deposit additional collateral to improve their financial standing.
Health Metrics in NEIQW Definition of Health
In the NEIQW protocol, "Health" represents the security level of a user's deposited assets used as collateral. A higher Health value signifies a reduced risk of liquidation, indicating a safer borrowing position.
Determinants of Health
Health fluctuates based on the value ratio of deposited collateral to the borrowed amount. It dynamically adjusts according to market values:
Increasing Health: Occurs when the value of deposited collateral rises or when borrowed amounts decrease.
Decreasing Health: Happens when collateral values drop or borrowed sums rise.
Thresholds and Indicators
Health levels are color-coded for quick reference:
Green for Health greater than 2: Indicates a strong, stable position.
Orange for Health under 1.99: Suggests moderate risk.
Red for Health under 1.1: Warns of high risk.
Liquidation is triggered when Health falls below 1.
Strategies to Improve Health
Users can enhance their Health by:
Repaying part or all of the borrowed amount.
Adding more assets to their collateral pool.
Liquidation Dynamics
Liquidation occurs if the Health metric drops below 1, indicating insufficient collateral coverage for the borrowed value. This may be due to a depreciation in the collateral’s value or an appreciation in the borrowed debt. During liquidation:
The borrower's debt is settled, and the equivalent value, along with a liquidation fee, is deducted from the collateral.
Accessing Liquidation History
Users can view their liquidation history by navigating to the account section indicated by the connected wallet address on the top left of the dashboard.
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