💸Borrowing

Borrowing on BOOKUSD

Borrowing on the BOOKUSD protocol allows users to access BUD, a USD-pegged stablecoin, by locking up BOOK as collateral. Here’s how the borrowing process works in detail: Collateralization:

To borrow BUD, users must deposit BOOK into the protocol. This deposit creates a Vault, which secures the borrowed BUD. Minimum Collateral Ratio: The collateral-to-debt ratio must be at least 140%. However, to prevent users from over-leveraging, we will not allow users to create a position with under 175% collateralization. For example, if you borrow 1,000 BUSD, you must deposit at least $1,750 worth of BOOK as collateral.

Borrowing Process: Open a Trove: Use the BOOKUSD interface to lock BOOK as collateral.

Set Borrow Amount: Specify the amount of BUD you want to borrow. The amount must not exceed your borrowing limit, determined by the collateral ratio.

Pay the Issuance Fee: A one-time fee (e.g., 4% of the borrowed amount) is charged at loan issuance. This fee is added to the total debt of the trove.

Repaying Debt:

Borrowers can repay their debt at any time: Repayment Amount: The total borrowed BUD plus any accrued fees. After repaying the debt, borrowers can reclaim their collateral.

Liquidation Risk:

If the collateral ratio of your trove falls below the minimum requirement (140%), it becomes subject to liquidation: Liquidation Process: In the event your trove is liquidated, your BUD debt will be repaid, and you will lose access to your collateral. You will be free to open a new trove if you wish.

In a liquidation, BUD is taken from the stability pool to repay the bad debt. The collateral that was covering this debt, will be given to stability pool stakers.

Benefits of Borrowing: Interest-Free Loans: Borrowers do not incur ongoing interest on their debt. Leverage BOOK: Borrowers can use BUD for trading, staking, or other DeFi activities without selling their BOOK. Decentralization: The borrowing process operates without intermediaries, ensuring transparency and trustlessness.