Borrowing

Borrowing on TownSquare allows you to deposit collaterals into create loans to initiate borrowing. Unlike traditional borrow and lend markets where lending deposits and collateral deposits are mixed. Collateral deposits on TownSquare exist in separate pools from lending deposits, to increase security around risk contagion.

TownSquare lending markets have a highly customized borrowing experience, with key differentiators in the following aspects:

  • Multi-loan borrowing: users can create multiple loans under their account, allowing for better risk segregation, unlike the traditional deposit-and-borrow model.

  • Multi-collateral loans: each loan on TownSquare allows for multiple collaterals to be deposited, in both General Loans and in Efficiency Loans. This allows users to have reduced chances of liquidations when risk is spread across multiple collaterals.

  • General mode & Efficiency mode: users can choose to create General Loans or Efficiency Loans for different borrowing strategies. General Loans allow for a diversified set of collateral assets to be deposited into the same loan, whereas Efficiency Loans only allow for correlated assets to be collateralized with an up to 95% LTV for enhanced capital efficiency and lower liquidation risks.

General Loans

General loans allow for a mix of uncorrelated collaterals to be deposited into the loan. Each asset is marked at a collateral factor in the protocol. The collateral factor shows how much value of the asset could be borrowed against in a loan. In cases where multiple collaterals are in a loan, the asset with the highest collateral factor gets used first for borrowing.

Efficiency Loans

Efficiency Loans allow correlated assets to be deposited and collateralized for a high LTV / collateral factor. Currently on TownSquare, there are two types of Efficiency Loans:

  • MON Efficiency Loans: MON, wMON, shMON, sMON, gMON, and aprMON can be collateralized to borrow wMON and MON for 92.5% LTV.

  • Stablecoin Efficiency Loans: USD1, AUSD, USDC, USDT, earnAUSD, sAUSD, muBOND, and AZND can be collateralized to borrow these assets for 95% LTV.

User guide

Refer to the Borrow page for how to collateralize assets on TownSquare.

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