DeFi Lending and Borrowing: Concepts and Mechanism
DeFi Connect Credit stands out for several key features that differentiate it in the growing world of Decentralized Finance. These features are the backbone of our platform and are designed to provide traditional investors with a safe, efficient, and principled investment experience. Below we highlight these key features:
Get Funds Instantly. Keep Your Crypto.
Borrow without selling your crypto with rates as low as 0% and no extra fees. Just top up, and your credit line is immediately available.
Why Use Our Credit Lines
Get as much or as little as you want, whenever you want, with the most flexible crypto credit line out there.
Instant Approval
You are approved within seconds, and you get the funds within 24 hours in most cases.
No Installments
Pay off your balance partially or fully when you want with no fixed payment schedule.
Borrow at Just 0% Interest
Get premium rates of just 0% by becoming a Platinum client and keeping your Loan-to-Value (LTV) below 20%. It's a flexible option so that you can switch between premium rates and our standard offering.
Interest Rate on Loans
The loan interest rate depends on your Loyalty Tier, which is determined by the ratio of Native Tokens against the rest of your portfolio balance:
I. Base (No Native Tokens are needed)
II. Silver (The ratio of Native Tokens in your account against the rest of your portfolio must be at least 1%)
III. Gold (The ratio of Native Tokens in your account against the rest of your portfolio must be at least 5%)
IV. Platinum (The ratio of Native Tokens in your account against the rest of your portfolio must be at least 10%)
Please keep in mind that the interest applied to loans is compound, i.e., it is calculated on both the initial principal and the accumulated interest.
With higher Loyalty, you will get benefits on interest or withdrawal fee refunds.
Borrow and lending platform
In our lending and borrowing ecosystem, we offer a transparent and flexible interest rate structure across different tokens. Each token comes with different rates and borrowing periods, allowing users to tailor their investment strategies. Explore the options and choose the terms that align with your investment goals.
Liquidation threshold
This represents the threshold at which a borrow position will be considered under collateralized and subject to liquidation for each collateral. For example, if a collateral has a liquidation threshold of 80%, it means that the position will be liquidated when the debt value is worth 80% of the collateral value.
Borrow Threshold
Borrow Threshold denotes the maximum allowable borrowing limit determined by the collateral's value. It serves as an upper cap, indicating the highest amount a borrower can borrow relative to the total value of their provided collateral. For instance, if set at 80%, borrowers cannot exceed borrowing an amount that is 80% of their collateral's value. This threshold acts as a risk management measure, ensuring responsible borrowing practices and maintaining a balance between borrowing capacity and collateral value to foster a secure and sustainable lending environment for both borrowers and lenders.
Loan-to-Value (LTV) Explained
The Loan-to-Value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of the corresponding collateral. Otherwise, the measurement of the loan balance relative to the collateral asset's value is represented as Loan-to-Value (LTV).
Traditional lenders (e.g., banks) use your credit score, as reported by third-party credit agencies, to determine your creditworthiness. The higher your credit score, the lower the risk for the lender. To remove the credit score from the equation, you can apply for an asset-backed loan like the one offered by DeFi Connect Credit.
LTV is calculated as the loan amount in USD divided by the value of the collateral in USD, expressed as a percentage.
Example:
Loan amount: 5,000 USD
Value of collateral: 10,000 USD
Loan-to-Value = ($5,000 / $10,000) * 100 = 50.0%
Tokenization of Traditional Assets
Our platform allows the tokenization of a wide variety of traditional assets, from stocks to government bonds and other financial instruments. This means that investors can hold tokens that represent ownership of these assets, providing flexibility and global access.
Decentralized Investment Funds
Inspired by Warren Buffett's investment strategy, we facilitate the creation of decentralized investment funds. These funds are based on strong underlying assets backed by smart contracts. Investors can participate in these funds by providing liquidity in the form of cryptocurrencies or tokens.
Collateralization and Real World Asset Tokens (RWA Tokens)
We implement a collateralization mechanism for the issuance of RWA tokens. Users can deposit collateral in the form of cryptocurrency or other eligible assets on the platform. These RWA tokens represent ownership or value tied directly to real-world assets, such as properties, stock market assets, or third-party projects. By tokenizing real-world assets, users gain direct exposure to their value, breaking traditional barriers and increasing accessibility to high-value investments.
Oracles and Real-Time Asset Valuation
We leverage a system of reliable oracles to provide real-time data on the valuation of tokenized assets. This ensures that RWA token prices remain aligned with the actual market value of the underlying assets. By maintaining accurate and up-to-date valuations, the platform delivers a transparent and fair experience for all participants, fostering trust and reliability in trading and investment activities.
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