Although, the primary use case of ARTH Loans is not generating revenue, instead it is for users to take out seamless loans in a stable valuecoin, that is resistant to inflation. DeFi users, however, can generate revenue via:
Liquidating low CR% loans
Depositing ARTH valuecoin to the Stability Pool to earn liquidation rewards. Stability Pools always gives a net positive reward overtime.
Participate in various staking/LP pools with partner projects and earn rewards in MAHA and partner tokens.
A metamask wallet
Collaterals in the form of WETH, WMATIC, DAI
Please note: If you are familiar with only the ETH chain, you will have to bridge your tokens to Matic. This can be done simply with a few web searches. Here is the bridge link: https://wallet.matic.network/bridge/
To become a Stability Provider, you need ARTH valuecoin.
$ARTH can be borrowed by putting in collateral in the form of opening a loan position. Alternatively, you can also buy $ARTH from the open market directly from a DEX like Dfyn.
To make liquidations profitable, the borrower needs to keep away a gas fee compensation at the time of borrowing ARTH. The current gas fee compensation is 5 ARTH or $10. This is significantly lower than the average gas fees on the ETH chain. Hence, Polygon Network.
A borrower can only take out a loan, by creating a debt position of not less than 250 ARTH or $500.
Stability Providers deposit ARTH into the stability pool, which acts as a supplement to the Loan platform. Depositing ARTH valuecoin to the Stability Pool earns you liquidation rewards.
Whenever a loan position is liquidated, the collateral used to fund the loan (at 110%), is returned to the Stability Pool. Stability Providers always remain in a safe and net positive position.
Liquidations happen below 110% Collateralization Ratio. Let's take a situation where:
Current ARTH Pooled in the stability pool: $1,000,000 or 500,000 ARTH (1 $ARTH = 2 USD)
You deposit $100,000 or 50,000 ARTH
Thus, you have a 10% stake in the Stability Pool
A loan position of $200,000 gets liquidated at 109% collateral Ratio
Collateral liquidated = Loan taken out * CR% / Current Price of collateral
What do you pay:
Given that your pool share is 10%, your ARTH deposit will go down by 10% (the ARTH you added into the Stability Pool is used to settle the debt into the system) of the liquidated debt
Total Debt to be settled = 200,000 USD
Your Debt Share = 10%
Your Debt share = 20,000 USD (10% of Total Debt)
Your initial ARTH position: 100,000 USD
Your new ARTH position: 80,000 USD (Initial Position - Your Debt Share) .
What do you get:
In return, you will gain 10% of the liquidated collateral(72.66 WETH), i.e.
7.26 WETH, which is currently worth $21,780(Current WETH price: $3000). Your net gain from the liquidation is
Note that depositors can immediately withdraw the collateral received from liquidations and sell it to reduce their exposure to a volatile asset like ETH, if the USD value of ETH is expected to decrease.
Almost anybody can liquidate a loan position.
The requirement to liquidate a loan position is simply:
Current Collateralization Ratio < Minimum Collateralization Ratio
Minimum Collateralization Ratio in Normal mode: 110% Minimum Collateralization Ratio in Recovery mode: 150%
For every liquidation, the liquidator will have to pay gas fees. To make sure, liquidations are profitable, a significant gas fee is kept aside at the time of borrowing a loan.
Currently, the gas fee compensation is set at 5 ARTH or $10 acc to the current GMU of $2.
The CR in Recovery Mode is 150%. While the CR in normal mode is 110%.
Yes. While the redemption fee remains the same, the borrowing fee is changed to 0% to encourage borrowing in the system.
As a borrower, simply increasing your collateral ratio to >150% will protect you from any liquidations. Thus, you will have to either a) add more collateral or b) repay some debt
Yes - during recovery mode your position can be liquidated if it falls below 150% CR. Otherwise, during normal circumstances, the CR will remain at 110%. It is advised to both monitor and adjust as needed to avoid liquidation risk.
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