Borrowing On Hatom

as of 17/06/2023

What is Borrowing ?

We call borrowing the operation of taking a loan from a lending protocol by taking tokens out of a pool of assets. In the opposite of Lending, which is supplying tokens to a pool of assets.

Why would I borrow instead of selling my assets ?

Selling your asset pushes you to close your position on that asset. If you are long on the asset, you would not be entitled to the potential upside value gain. When you Borrow, you can get liquidity without selling your asset. Users usually Borrow to leverage their holdings, make new investment opportunities, or unexpected expenses.

How do I borrow ?

To Borrow, you have to deposit an asset to be used as collateral. Once you have deposited your collateral, go to the supplying section of the «App», and select the asset you want to Borrow. Select the amount you wish to Borrow and confirm your transaction. The amount you can Borrow depends on the amount you have deposited and used as Collateral.

How much I can borrow ?

The max amount that a user can Borrow depends on the amount of Collateral deposited and the token's Collateral Factor. The Collateral Factor - expressed as a percentage - is a multiplier used against your supplied assets.
The maximum amount you can Borrow also depends on the available liquidity. For example, you can’t Borrow an asset if there is insufficient liquidity or your Health Factor doesn’t allow you to.

What asset do I need to repay ?

You have to repay your loan using the same asset you borrowed. For example, if you Borrow 1 EGLD, you must repay 1 EGLD plus the interest accrued. If you want to pay back your loan based on USD price, you can Borrow USDC stable coin.
We have implemented an additional feature called Repay Dust, that if enabled within the transaction, will save you both Time and Fees. Repay Dust let you get rid of the whole accrued interests, even those accumulated within seconds when the transaction was being broadcasted. Read more about this last feature here.

Is the rate stable or variable ?

The rate is Variable. It is based on the Supply and Demand in Hatom Protocol. The variable rate will vary depending on market conditions over time and could be the optimal rate.

How much would I pay in interest ?

The Interest Rate you have to pay for borrowing assets is based on the Supply and Demand ratio of the asset. The interest rate of each asset changes constantly depending on market conditions. The current interest rate is available in the borrowing section of the «App».

What is the Health Factor ?

The Health Factor is a numeric representation of the safety of your deposited assets against the borrowed assets and their underlying value. The higher the value is, the safer your funds are from being Liquidated.
A multiplier represents the Liquidation Threshold. For example, HealthFactor of 0.9 means that if the amount you borrow is worth (at least) 0.9 of your collateral, your position is subject to liquidation. Must follow: CollateralFactor <= HealthFactor< 1.
Note that : HealthFactoralso refers toLiquidationFactor.

What happens when my health factor is reduced ?

The Health Factor will increase or decrease depending on the Value Fluctuation of your deposits. An increase in your health factor will improve your Borrow position by making the Liquidation Threshold more unlikely to be reached. If the value of your collateralised assets against the borrowed assets decreases instead, the Health Factor will also decrease, thus increasing the risk of Liquidation.

When do I need to pay back the loan ?

There is no specific time to pay back the loan. You can keep the loan as long as you want if your position is safe.
Keep in mind that the accrued interest will increase as time passes, making your Health Factors decrease and increasing the Liquidation risk of your assets.

How do I payback the loan ?

You can pay back your loan by going to the 'Borrowings section' of your Dashboard, selecting the asset you have borrowed, and clicking on the repay button. Select the amount you want to pay back and confirm the transaction.
When repaying your total loan, you may find some "Dust" left from the loan that you still need to repay. It has been generated while you were paying back your loan as the interest gets accrued every second.
You can remove that dust by clicking on the "Max" button and making sure that the "Repay Dust" box is selected. A transaction with a slightly higher amount than what is due will be sent, the total of your loan will be repaid, and the small difference left will be sent back to your wallet during the same transaction.
For example:
-Let's suppose that you want to repay your loan of 10.1 EGLD.
-You will go to the "Repay" section, click on "Max" and make sure that the "Remove Dust" box is selected.
-Once you click on "Repay", a transaction of around 10.1101 EGLD will be sent.
-After you confirm the transaction in your wallet, your total loan will be paid, and you will receive back approximately 0,0101 EGLD in your wallet.

How do I avoid Liquidation ?

There are two options to avoid Liquidation. You can either repay your loan or deposit more assets to increase your Health Factor. Repaying the loan is the option that would increase your Health Factor more.