The Primary Lending Platform (PLP) is Fringe’s lending and borrowing facility. Within the PLP, Lenders can deploy their capital —whitelisted stablecoins— to earn interest. Borrowers, on the other side, may take stablecoin loans against whitelisted altcoin collateral from the pool of funds provenient from Lenders.
To get started, all you need is a Web3 (Metamask, Trustwallet, etc.) wallet with the assets you want to lend or borrow against and some ETH to pay for the fees associated with your loan. The app is entirely browser-based, so you do not need to download anything to use it.
When you deposit stablecoins into the Primary Capital Pool, you will receive a corresponding amount of fTokens in return. fTokens are interest-bearing assets, so just by holding them you are already receiving interest.
When you deposit a whitelisted token as collateral for a loan into the PLP, you will be creating (or replenishing) your Collateral Safe for that token.
Based on all your Collateral Safes combined, the platform will then calculate how much borrowing capacity you have available. Your borrowing capacity is represented by your balance of PIT tokens. Your $PIT balance fluctuates constantly with the market price of your collateral assets. 1 $PIT = $1.
Note that any stablecoin loan is bound with a particular Collateral Safe, and you may have multiple loan positions open simultaneously, one for each of your Collateral Safes. Loans are subject to interest, which is calculated per block, increasing the amount in stablecoins needed to settle your loan. Interest also affects your remaining PIT balance.
The LVR is a percentage between 1% and 100% that represents what percentage of the value of a collateral asset can be taken out as a loan. For instance, a deposit of $1000 worth of a token with a 60% LVR would allow a user to borrow up to 600 USDC.
Determining a suitable Loan to Value Ratio (LVR) for a collateral asset plays an important role in maintaining platform stability.
The aim of the LVR is to best assure the loan remains overcollateralized even when the collateral asset experiences adverse market price action. Accordingly, determining the LVR for a given collateral asset involves analyzing the asset’s historical price volatility and then assuming that volatility will tend to extend into the future. The more historically volatile a collateral asset’s price is, the lower the LVR will be set, and vice-versa.
The method to determine LVR is to analyze the price history of the collateral asset and gauge its maximum price falls over the period of time during which liquidations are reasonably likely to take place. We have used a period of four hours to assess an asset’s volatility.
Fringe Finance sets the maximum aggregate borrowing amount for each collateral asset. This is aggregated across all borrowers.
This is to protect the platform from price manipulation attacks and to ensure liquidators will be willing to perform liquidations.
The Liquidator Reward Percentage is the percentage of additional collateral assets awarded to the liquidator when they liquidate a loan position. When a liquidator pays off a loan, they receive collateral assets to the value they paid PLUS the Liquidator Reward Percentage.
The Primary Lending Platform automatically adjusts the interest rate charged to Borrowers so that a balance occurs to economically incentivize Borrowers’ and Lenders’ participation in the platform.
- When there is high Borrower demand, the interest rate they are charged will be algorithmically increased. This will attract more Lenders to the platform – who will receive a share of the greater interest charges collected from Borrowers.
- When there is low Borrower demand, the interest rate they are charged will be algorithmically decreased. This will attract more Borrowers to the platform.
The term Utilization Rate is used to describe demand from Borrowers. A low Utilization Rate will tend to decrease interest rates and a high Utilization Rate will tend to increase interest rates. Each stablecoin market offered by the Primary Lending Platform will have its own interest rate according to its Utilization Rate.
Lenders deposit whitelisted stablecoins to the Primary Capital Pool and receive fTokens in return to reflect their deposit. The Primary Capital Pool is composed of separate markets of each whitelisted stablecoin. fTokens are the interest-earning representation of users’ deposited capital assets.
PIT tokens represents your borrowing capacity in the PLP. These tokens are non-transferrable and pegged to $1. Your $PIT balance fluctuates constantly with the market price of your collateral assets.
As of now, the PLP is only deployed on the Ethereum Mainnet.
The Health Factor is the ratio between the maximum borrowing capacity of the collateral backing a loan and the loan’s current value. A ratio higher or equal to 1 means the loan is safe from liquidation at that moment, while a loan with a Health Factor below 1 can be liquidated.
For now and until the Fringe DAO is in place, you need to contact the Fringe Finance team directly. To do so, please reach out to us through our official Discord or Telegram channels.