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Lending
How do I lend?
Where do I lend?
What can I lend?
What can I lend against?
What are the fees?
How do I decide on what price bucket to deposit into?
What do I need to do after depositing quote tokens?
What can go wrong?
In what scenario(s) can a lender lose their deposit?
In what scenario(s) are lender deposits frozen?
How does a lender get paid if a borrower defaults on their loan?
Are there any notifications?
How much do I earn?
When is my deposit eligible to earn interest?
Users can lend on Ajna through any applications that plug into the protocol.
Users choose what valuation they are willing to lend against by depositing tokens into specific price buckets.
- Easy
- Static Open Source Frontend (soon)
- Other apps with Ajna integrated (soon)
- Advanced
- Use the SDK to build an interface or bots (soon)
- Ether.js or Web3.py (interacts with Ethereum) & connect to your own node (soon)
Users can lend any ERC-20 token.
Users cannot lend ERC-721 NFTs or NFT Collections, or any other NFT types.
The following types of tokens are incompatible with Ajna, and no countermeasures exist to explicitly prevent creating a pool with such tokens, actors should use them at their own risk:
- NFT and fungible tokens which charge a fee on transfer.
- Fungible tokens whose balance rebases.
The following types of tokens are incompatible with Ajna, and countermeasures exist to explicitly prevent creating a pool with such tokens:
- Fungible tokens with more than 18 decimals or 0 decimals, whose
decimals()function does not return a constant value, or which do not implement the optional decimals() function.
Users can lend their ERC-20 tokens against any ERC-20, ERC-721, or 721-subsets.
The following types of tokens are incompatible with Ajna, and no countermeasures exist to explicitly prevent creating a pool with such tokens, actors should use them at their own risk:
- NFT and fungible tokens which charge a fee on transfer.
- Fungible tokens whose balance rebases.
The following types of tokens are incompatible with Ajna, and countermeasures exist to explicitly prevent creating a pool with such tokens:
- Fungible tokens with more than 18 decimals or 0 decimals, whose
decimals()function does not return a constant value, or which do not implement the optional decimals() function.
- 1.Unutilized Deposit Fee Deposit below the LUP incur a small fee equivalent to 24 hours of interest.
- 2.Transaction Fees These are fees that are charged on blockchain transactions generally, the more complex the transaction, the larger the fee.
Deciding on a price depends on the lender's risk tolerance. Both depositing too high and too low have risks.
Depositing too high:
- Creates a need to more closely micromanage the position. Meaning the lender will need to move their deposit lower as the market price approaches their deposit's price bucket.
- Risks getting traded against at an unfavorable price if the market price crosses below the deposit's price bucket. Deposits are always swappable for collateral at the price of their buckets.
- Risks deposit being temporarily frozen, since the highest valued deposits are frozen first during a liquidation. The lender may have their deposit swapped for collateral when this occurs.
Depositing too low:
- May result in the deposit not earning interest if it is below the Pool's Highest Threshold Price (HTP).
- Additionally, if a deposit is made below the Lowest Utilized Price (LUP), then an unutilized deposit fee is charged equivalent to 24 hours of interest.
Thank you Summer.fi team for this image!
Occasionally users may want to move their deposits to different price buckets. Monitoring the market price of the collateral token is key to making such decisions.
As the collateral price drops, users may want to consider moving their deposit down.
As collateral price increases, users may want to consider moving their deposit up.
- The protocol gets hacked or exploited.
- Your quote tokens are traded against for collateral at an unfavorable price.
- If no one posts a bond and the position sits undercollateralized,...
- As a result of interest, bad debt accrues.
- If no one bids on a liquidation and the collateral is sold for close to 0, bad debt can result.
- To cover the bad debt, reserves are depleted first and then the lenders from the highest price buckets down.
There are three scenarios when a lender can lose their deposit:
- 1.If the protocol gets hacked or exploited.
- 2.If a lender allows the market price to cross below their deposit's price bucket someone can trade collateral for their deposit, leaving the lender with collateral instead of quote tokens.
- 3.If there is bad debt and reserves are insufficient, the lender risks losing part of their deposit.
- 1.A lender cannot withdraw deposit if doing so would move the LUP below the HTP, as this would result in liquidation eligibility for one or more loans.
- A borrower's position can be liquidated if the pool's LUP is below their TP.
- If a lender wishes to remove deposit from a bucket that will cause the LUP to move below the HTP, they will need to liquidate the loan(s) that sit between the two points.
- 2.if there are active liquidations in the pool, deposits that are within liquidation_debt (amount) of the top of the book cannot withdraw until the liquidations are complete.
If a borrower defaults, their loan will go through the liquidation process where the collateral is sold to cover the debt. The sale occurs through a Dutch Auction and can utilize lender deposits at the top valued price buckets.
Lender deposits at the highest priced buckets are at risk to be traded against, leaving depositors with the options of claiming the collateral and selling it to retrieve their deposit, or to wait for someone to trade quote tokens for the collateral at that price.
Notifications are not a native feature of the Ajna Protocol. Please check with the application you are using or other 3rd parties for notification services.
How much a lender earns depends on the pool and the eligibility of the deposit.
To look at pools and their lender rates, check out https://info.ajna.finance/
Rates are subject to change every 12 hours, in x1.1 or x0.9 increments.
A portion of the interest goes to the pool's reserves and is used to provide a liquidity cushion to lenders, and absorb bad debt if some should occur. This Net Interest Margin (NIM) is approximately 10% of the interest rate revenue.
All deposits above a pool's HTP earn interest at the same rate. In the event that the HTP is above the LUP, usually during active liquidations, all deposits above LUP earn interest at the same rate.
For more details see section 8 of the whitepaper.
Last modified 26d ago