Borrowing ARTH
As the primary use case of the loans platform, let's see how borrowing works and how you can benefit with it..
ARTH Loans is a unique borrowing platform for DeFi users.
It offers 0% interest loans & provides a more effective approach to borrowing than other systems such as AAVE, Compound, etc.
One can easily lock up their crypto assets & borrow ARTH against the collateral. Redeeming a loan position is just as simple and quick. Once you repay your position in ARTH valuecoin, you get your assets back.
Adding to this further, the introduction of leverage will be a game-changer.

Accepted Assets as collateral

Because ARTH Loans is launching on Polygon Network, you can use the following assets to take out a loan in ARTH:
  • WMATIC
  • WETH
  • DAI
To borrow, a user has to open a loan position & deposit a certain amount of collateral for it. You can then, draw ARTH depending upon the collateral ratio you set. You can set a collateral ratio of 110%+.
Note: A minimum debt of 1,800 ARTH is required for you to create a loan position. A user also has to set aside $200 for gas fees in case of liquidations.

Collateralization Ratio

Let's understand the collateralization ratio in further detail.
The CR or collateralization ratio is the ratio that determines how much ARTH a borrower will receive for the assets he is willing to collateralize. The CR is set by the user. The minimum CR required is 110%.
Example 1: If user A sets a CR of 110% and creates a position of 10,000$ in ARTH, he would have to at least collateralize 11,000$ worth of collateral(WMATIC, WETH, or DAI). This position is highly prone to liquidation, if the CR% falls below 110%.
Example 2: If user B sets a CR of 150% and creates a position of 10,000$ in ARTH, he would have to at least collateralize 15,000$ worth of collateral(WMATIC, WETH, or DAI). This position is more secure than Example 1.
Thus, a higher CR% means the user's position is less prone to liquidation, but also means that he will receive less ARTH for the collaterallaized position. Whereas a lower CR% means the user's position is more prone to liquidation, but he will receive more ARTH for the collateralized position.
The Minimum Collateralization Ratio or MCR is the lowest ratio of collateral that will not trigger a liquidation. This is set at 110% under normal conditions.
However, in recovery mode, this MCR is set to 150%. To avoid liquidation during Recovery Mode, it is recommended to keep ratio above 150%.
As a borrower, you should make sure you are creating positions that are not prone to get liquidated to avoid loss of funds.
Last modified 3mo ago