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Borrowing

FxDAO users can borrow stablecoins against their Lumens, this process is automatic and open to everybody as long as the protocol's conditions are met.

How can users borrow against their Lumens?​

With the FxDAO protocol, users create a Vault and deposit Lumens into it so they can receive up to an 85%* of the value (a 115%* collateral ratio) in stablecoins with the denomination selected by the user or the one available at the moment. Even doe the issuance occurs at a 115% rate, the minimum required before the Vault enters into liquidation territory is the Minimum Collateral Ratio, it is done this way so borrowers don't risk an instant liquidation if there is volatility in the market.

The accepted collateral​

In FxDAO the initial asset accepted for collateral are Lumens, the reason for this is:

  • No one can clawback them

  • Lumens are the most liquid asset in the whole Stellar network

  • There are no special requirements for Lumens (trust lines, base reserve, etc)

It is possible that in the future the protocol will accept more assets but for now Lumens are the only ones accepted.

What are the borrowing/repayments fees?​

FxDAO has a flat rate for borrowing stablecoins, this rate is 0.5%* of the amount deposited and is the only fee borrowers pay during the issuance of the stablecoins.

There is no fee when repaying your debt but there is a penalty fee of 0.5%* if the debt is repaid before its first year, otherwise the repayment of the debt and unlocking of the collateral is totally free.

When it comes to recurrent fees, the protocol introduces a yearly fee of 0.5%* that is charged on the collateral automatically once the time is enough.

By following this schedule of fees, the protocol gives out one of the best rates out there in the market because a regular 1 year loan pays only 1%* of the amount deposited.

Am I the only who can withdraw Lumens from my Vault?​

In order to allow all users to redeem at any moment the stablecoin value in collateral, our protocol follows a strategy of: The riskier Vault is open for redeems. This means that if your Vault's collateral ratio is the lowest available in the protocol, users who would like to exchange their stablecoins for Lumens at the price ratio they will be able to do it from your Vault.

This doesn't mean you loose funds, your debt is adjusted at the correct rate but you loose the amount redeemed by others users. If you want to avoid this, you need to keep your Vault with a bigger enough collateral so is not the lowest in the protocol.

If all of the funds are withdrew from the Vault, the Vault is closed and your debt is removed because it was "paid" by others.

Is there a minimum and maximum amount to borrow?​

The minimum amount accepted by the protocol in order to open a Vault is $USD 5000* (without matter the denomination of the stablecoin issued) but there is no maximum amount you can borrow.

Does FxDAO allow leveraged positions?​

Yes, FxDAO allows up to 10x leveraged positions so you can use the protocol to get more exposure to Lumens if that's what you need.

The process to leverage the position is by open a Vault and buy more collateral from the open markets (the Stellar Network) with the stablecoin you just got so you can deposit more into the Vault and receive more stablecoin, by repeating this process you can leverage your exposure to the collateral.

Important: Using leverage for any type of investment is risky, be careful about it because you could loose all your collateral quickly if there is a crash on the market.