Borrow

How to borrow

You have two flexible ways to receive borrowed funds:

• Borrow to linked wallet: Funds are sent directly to your connected wallet
• Borrow to any address: Specify any address you want to receive funds

Borrow to linked wallet

Borrowing USDT on Ethereum using supplied Bitcoin as collateral

1. Select the Borrow tab
2. Choose which asset you want to borrow via the dropdown
3. Enter an amount to borrow (learn how this affects your portfolio health below)
4. Click Borrow then select Wallet
5. Sign the authorization message

Borrow to a specific address

You can borrow to any address without needing a linked wallet.

Borrowing USDT to a specific address

1. Select the Borrow tab
2. Choose which asset you want to borrow via the dropdown
3. Enter an amount to borrow
4. Click Borrow then select Borrow address
5. Enter the destination address and confirm it's valid
6. Sign the authorization message

Pending borrows

Once you initiate a borrow, your loan position is marked as active immediately and affects your portfolio health right away. The initialization process takes about 3 minutes.

After initialization, the borrowed funds are sent to your chosen destination (wallet or address). The transaction confirmation time depends on the blockchain:

• Bitcoin: ~10 minutes per confirmation.
• Ethereum: ~12s per confirmation.

How it works

Borrowers supply assets as collateral in order to access funds from a pool of lender deposits. In return, borrowers repay the borrowed amount plus interest, which accrues to lenders as compensation for providing liquidity.

All loans are over-collateralized. If the value of the collateral falls below required thresholds, the position becomes eligible for liquidation to help maintain pool solvency.

Your loan terms

• Interest is denominated in APY (Annual Percentage Yield)
• The APY is dynamic and fluctuates depending on market conditions
• Interest accrues continuously and compounds
• Interest starts accruing immediately
• There is no set repayment date - you can repay any amount at any time
• Borrow outflows include a small network fee deducted from the sent amount (no separate gas needed)
• If your debt position becomes too risky, you are open to automatic liquidations. Learn more below:

Understanding portfolio health

When you borrow against your collateral, it's crucial to understand your portfolio health to see your borrowing capacity and avoid liquidations.

What is liquidation

Liquidation occurs when your borrowing position's health factor becomes too low. When this occurs:

• Automated bots may step in to repay part of your debt
• In return, they receive some of your collateral at a discount
• This mechanism helps maintain protocol stability, though it is generally unfavorable for the borrower

Liquidations are a safety mechanism: if the value of your collateral falls too far relative to your borrowed amount, the protocol acts to protect itself and other users.

Health factor explained

Your portfolio health is measured by a Health Factor - a simple number that tells you how safe your borrowing position is:

The UI displays the portfolio health as a percentage, where:

• 100%: No debt - you haven't borrowed anything
• Above 0% to 99%: Your position is safe from liquidation - the higher the percentage, the safer you are
• Close to 0%: You're at risk - the closer to 0%, the higher the liquidation risk
• 0%: Your position can be partially liquidated

What affects your health factor?

Your Health Factor depends on several key factors:

1. Collateral Value

• The total USD value of all assets you've supplied to the protocol
• This changes as asset prices fluctuate

2. Debt Value

• The total USD value of everything you've borrowed
• Includes interest that accumulates over time

3. Liquidation thresholds

• Each asset has a different risk level called a "liquidation threshold"
• This percentage determines how much you can safely borrow against that asset
• For example, if Bitcoin has a 74% liquidation threshold, your borrowing power is based on that 74% limit
• These thresholds reflect how volatile and liquid each asset is

Supplying 0.000827 more BTC will increase our portfolio health from 66% to 80.4%

Weighted liquidation thresholds

When you have multiple types of collateral, the protocol calculates a weighted average of all your liquidation thresholds.

Current market values can change, so always check the latest values on the Markets page.

This weighted threshold is then used to calculate your overall portfolio health.

Managing liquidation risk

How much can be liquidated?

Liquidation only occurs when your Health Factor reaches 0% or below. However, the amount that can be liquidated depends on your debt to collateral ratio:

• Health Factor at or above -5% : Up to 50% of a position's debt can be liquidated
• Health Factor below -5% : Up to 100% of a position's debt can be liquidated, effectively closing the position

Protecting yourself

To avoid liquidation:

1. Monitor your Health Factor regularly - especially during volatile market conditions
2. Keep a buffer - don't borrow up to your maximum limit
3. Add more collateral when your Health Factor gets low
4. Repay debt to improve your position. Learn more about repayments
5. Set up alerts to notify you when your Health Factor drops. See notifications

Example scenario

Let's say you:

• Supply $15,000 worth of Bitcoin and Ethereum
• Borrow $6,000 in USDT
• Have a weighted liquidation threshold of 74%

Your Health Factor would be 1.85:

$$HF = \frac{\$15,000 \times 0.74}{\$6,000} = 1.85$$

This means you're in a safe position. To find at what price you'd be exposed to liquidation, you can calculate:

Liquidation occurs when:

$$Collateral\,Value \times Weighted\,Threshold = Debt\,Value$$

In this example:

• Current collateral: $15,000
• Debt: $6,000
• Weighted threshold: 74%
• Liquidation point:

$$\$6,000 \div 0.74 = \$8,108$$

So if your collateral value drops from $15,000 to $8,108 (a ~46% decline), you'd be exposed to liquidation. This could happen if Bitcoin drops significantly while your USDT debt remains the same.