FAQs
Table of Contents
What is the Primary Lending Platform?
The Primary Lending Platform (PLP) is Fringe’s lending, borrowing and margin trading facility. Within the PLP, Lenders can deploy their capital —a large range of whitelisted crypto assets— to earn interest. Borrowers, on the other side, may take loans against whitelisted crypto collateral from the pool of funds provided by Lenders.
What do I need to start using the PLP app?
To get started, all you need is a Web3 wallet (Metamask, Trustwallet, WalletConnect, Coinbase wallet etc.) with the assets you want to lend, borrow against or use as collateral in margin trades and some ETH to pay for the blockchain fees associated with your interactions. The app is entirely browser-based, so you do not need to download anything to use it.
How can I lend my crypto assets and start receiving interest?
As a lender, when you deposit your crypto assets into the Primary Capital Pools, 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.
How can I take out a loan on the platform?
When you deposit a whitelisted token as collateral for a loan into the PLP, you will be creating 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 based on the value of your collateral (multiplied by the collateral's LVR - or Loan to Value Ratio - and the lending token's LVR)
Note that (with Fringe V2) any loan is bound to 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 lending assets needed to settle your loan. Interest also affects your remaining borrowing capacity.
What is the Loan-to-Value Ratio (LVR)?
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. The borrowing capacity of your collateral is also determined by the LVR of the lending asset you borrow.
Borrowing capacity = Collateral Value * LVR(collateral) * LVR(lending asset)
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.
For more on the LVR, read Loan-To-Value Ratio (LVR).
What is the Debt Limit?
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.
For more on Debt Limits, read Maximum Borrowing Capacity (MBC).
What is the Liquidator Reward Percentage (LRP)?
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.
For more on the LRP, read Liquidator Reward Percentage.
How are the interest rates on the platform defined?
The Primary Lending Platform automatically adjusts the interest rate charged to Borrowers so that a balance occurs to economically incentivize Borrowers, Lenders and traders to participate 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.
Fringe employs our new capital-efficient interest rate model that targets a utilisation rate. For more information, see Interest Rates.
What are fTokens?
Lenders can deposit a wide range of whitelisted crypto assets to the Primary Capital Pools and receive fTokens in return to reflect their deposit. The Primary Capital Pools are composed of separate markets of each whitelisted capital asset. fTokens are the interest-earning representation of lenders’ deposited capital assets.
What are PIT tokens?
PIT tokens represents your borrowing capacity in the PLP. If you read mention of PIT tokens in earlier Fringe documentation, it has now been replaced with the more descriptive term Borrowing Capacity.
What networks are supported on the PLP?
As of late 2023, the Fringe Primary Lending Platform is deployed on the following chains:
Ethereum
Arbitrum
Polygon
Optimism
zkSync
What is the Health Factor?
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 or trading position is safe from liquidation at that moment, while a loan or trading position with a Health Factor below 1 can be liquidated.
Fringe also presents a metric called Safety Buffer for positions, which indicates the buffer of extra collateral you have available before the position becomes subject to liquidation. A Safety Buffer of, say, 50%, allows your collateral to fall in value by one third before it becomes subject to liquidation. It is important for borrowers and traders to ensure their Safety Buffer does not become too low.
How can I submit a listing request for my asset?
For now and until the Fringe DAO is in place, please contact the Fringe Finance team directly. To do so, please reach out to us through our official Telegram or Discord channels.
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