Yamfore
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Borrowing & Lending

What is the process of borrowing through Yamfore?

To acquire a loan, a user must first provide ADA as the collateral to borrow against. The users deposited ADA collateral will also require a corresponding amount of $CBLP tokens deposited alongside it. The loan amount a user wishes to borrow is always proportional to the value of their deposited ADA collateral, since the protocol only gives back a 1:1 value exchange for any deposited ADA collateral. The $CBLP tokens deposited alongside the borrowers ADA collateral simply act as a security deposit for establishing a loan position and are ALWAYS returned in their entirety to the borrower on closure of their loan position. During a loan term, the borrower is never subjected to any margin calls, ongoing interest repayments and maintains an indefinite repayment schedule.

What determines the ADA / CBLP ratio required for a loan position?

The ADA / CBLP ratio will be dictated by the stablecoin treasury level. As demand for crypto-backed loans increases and the protocol’s stablecoin treasury drains in value. The ADA / CBLP lending ratio ensures that a progressively higher ratio of $CBLP tokens are required to be allocated to a borrower’s collateral position to initiate a loan position. This heavily disincentives potential borrowers from opening up loan positions and brings added value to $CBLP token holders with the surplus demand for $CBLP tokens in the market. This surplus demand also introduces selling pressure from borrowers within the protocol exiting their loan positions to capitalise on the price appreciation of their $CBLP tokens. This directly releases capital within the protocol itself, aiding in further balancing of supply vs demand.
The illustration below visualises this metric as well as the users effective LVR at each level.
ADA / CBLP Lending Rates

How is the ADA / CBLP ratio calculated?

The ADA / CBLP lending ratio is determined by calculating the percentage of value left in the protocols stablecoin treasury in comparison to the hypothetical total max value amount. The stablecoin treasury starts with an amount representing the hypothetical total max value amount. As profits are acquired by the protocol, this hypothetical total max value amount increases. This increase requires the protocol to re-calculation the percentage of the value left in comparison to the new* hypothetical total max value amount. The yam formula below is used:
Yam formula

What stablecoins will Yamfore utilise?

The Yamfore stablecoin treasury will contain a combination of stablecoins native to the Cardano ecosystem. These stablecoins will be backed by verifiable on-chain assets and remain evenly distributed within the treasury at all times to ensure redundancy in the event of value depegging. The list of accepted stablecoins within the protocol can be added / removed via on-chain governance.

How much can I borrow?

The user is able to borrow as much as they desire pending they have sufficient collateral amount to borrow against. There are only limitations on the individual loan size able to be borrowed at a time, but there are no restrictions on the instances of loans a borrower is able to take through the protocol.

How does lending work?

There is no method of providing capital to Yamfore. All crypto-backed loans facilitated through Yamfore are directly funded from the protocols internal stablecoin treasury. This was necessary to remove many of the counterparty requirements of the lenders, such as ensuring the value of the borrower’s collateral never falls below a certain threshold or requiring ongoing interest repayments etc.

How do I repay my loan?

The user isn’t required to "repay" their loan at all, at least in the traditional sense. The Yamfore protocol simply operates by collecting the earned staking rewards of all deposited ADA collateral in the protocol. All staking rewards earned from the deposited ADA collateral of borrowers during their loan term are collected as payment by the protocol with no other / further payment obligations required from borrowers.

What happens if the value of my collateral falls?

Simply put, nothing. Because all capital lent by the protocol is owned by the protocol itself, a greater level of risk and more favourable loan terms is able to be given to the borrowers. This results in more competitive loan terms than traditional lending protocols / platforms and enables borrowers to have the assurance that their loan positions are secured regardless of any volatility in the financial markets. The Yamfore protocol simply relies on the accumulated staking rewards earned from the borrowers deposited ADA collateral in the protocol as payment for their loan position with no other/further payment obligations needed. The borrower is only able to exit their loan position and redeem their deposited $CBLP tokens & any surplus ADA pending that ther collateral has reached a certain valuation in comparison to the owed principal amount.

How do I exit my loan position?

The borrower is able to close their loan position at any time, pending that the value of their deposited ADA collateral is equal to or above 105% of the borrowed principal amount. If the borrower desires to exit their loan position early and redeem their deposited $CBLP tokens, but their deposited ADA collateral isn’t at or above the required level. The borrower can choose to pay the owed deficit of their ADA collateral to close their loan position and immediately redeem their deposited $CBLP tokens. As stated already, the $CBLP tokens deposited alongside the borrowers ADA collateral simply act as a security deposit for establishing a loan position and are ALWAYS returned in their entirety to the borrower on closure of their loan position.
When a borrower’s loan position is closed, 105% of the borrowed principal amount, as well as all earned staking rewards during their loan term is subtracted from the borrowers deposited ADA collateral value. The borrower receives the leftover difference of their ADA collateral, as well as the entirety of their deposited $CBLP collateral. There are no other / further payment obligations, and all initiated loans are indefinite in length of time and only closable by the borrower themselves. The 105% collateral requirement is NOT inclusive of any staking rewards earned by the borrowers deposited ADA collateral. This means the base value of the borrowers deposited ADA collateral itself, has to reach a value of 105% of the borrowed principal amount. (Note: 105% = originally borrowed principal amount & 5% flat fee based off principal amount)

Ok sounds good, but what are the risks?

The main risk comes in the form of overexposure to the native utility & governance token of the protocol, $CBLP. The $CBLP token is inherently riskier than ADA due to its relatively limited use case and smaller market capitalization. Ideally any user taking out a crypto-backed loan against their ADA would prefer the majority if not all of their deposited collateral to remain denominated in ADA.
Although the borrowers $CBLP tokens are ALWAYS returned in full on closure of their loan position. The market value of a borrowers deposited $CBLP tokens may vary greatly from the start of their loan term to the end of it. The Yamfore protocol is only concerned with ensuring the value of the borrowers deposited ADA collateral is of sufficient value before allowing a borrower to close their loan position and redeem their $CBLP tokens. It is entirely possible for a borrower to close their loan position and be in profit on their deposited ADA collateral, whilst down / neutral in price on their deposited $CBLP collateral.

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What is the process of borrowing through Yamfore?
What determines the ADA / CBLP ratio required for a loan position?
How is the ADA / CBLP ratio calculated?
What stablecoins will Yamfore utilise?
How much can I borrow?
How does lending work?
How do I repay my loan?
What happens if the value of my collateral falls?
How do I exit my loan position?
Ok sounds good, but what are the risks?