Borrowing

PSY protocol offers a unique borrowing experience that is both interest-free and highly capital efficient. This means that for the same loan, less collateral is required compared to other borrowing systems. Instead of selling your collateral like wstETH or rETH to have liquid funds, you can use the protocol to lock up your collaterals, borrow against the collateral to withdraw SLSD, and then repay your loan at a future date.

Borrowing $SLSD

To borrow you must open a Trove and deposit a certain amount of collateral to it. Then you can draw SLSD up to a collateral ratio of 110%. A minimum debt of 2,000 SLSD is required.

This is the ratio between the Dollar value of the collateral in your Trove and its debt in SLSD. The collateral ratio of your Trove will fluctuate over time as the price of Ether changes. You can influence the ratio by adjusting your Trove’s collateral and/or debt — i.e. adding more collateral or paying off some of your debt.

For example: Let’s say the current price of your collateral is $3,000 and you decide to deposit 20 collateral tokens. If you borrow 10,000 SLSD, then the collateral ratio for your Trove would be 300%.

When borrowing, one must maintain the minimum collateral ratio 110% in normal situaltion, and 150% in Recovery Mode. To avoid liquidation during Recovery Mode, it is recommended to keep ratio comfortably above 150% (e.g. 200% or better 250%).

For example, If you stake $30,000 worth of collateral and borrow 20,000 SLSD that would put your ratio at 150%.

Accepted collaterals

PSY is going to add multiple LSDFi positions and LP positions of LSTs as collaterals.

Leveraging positions

Borrowers speculating on future collateral price increases can use the protocol to leverage their collateral positions up to 11 times, increasing their exposure to price changes. This is possible because SLSD can be borrowed, and sold on the open market to purchase more collaterals — rinse and repeat.*

*Note: This is not a recommendation for how to use PSY. Leverage can be risky and should be used only by those with experience.

Managing debt positions

Each debt position is called "Trove". A Trove is where you take out and maintain your loan. Each Trove is linked to an Ethereum address and each address can have just one Trove. If you are familiar with Vaults or CDPs from other platforms, Troves are similar in concept.

Troves maintain two balances: one is a asset acting as collateral and the other is a debt denominated in SLSD. You can change the amount of each by adding collateral or repaying debt. As you make these balance changes, your Trove’s collateral ratio changes accordingly.

You can close your Trove at any time by fully paying off your debt.

Interest-free borrowing and fees

The protocol charges one-time borrowing and redemption fees that algorithmically adjust based on the last redemption time. For example: If more redemptions are happening (which means SLSD is likely trading at less than 1 USD), the borrowing fee would continue to increase, discouraging borrowing.

1. A 20 SLSD Liquidation Reserve charge will be applied as well, but returned to you upon repayment of debt.

2. The borrowing fee is added to the debt of the Trove and is given by a baseRate . The fee rate is confined to a range between 0.5% and 5% and is multiplied by the amount of liquidity drawn by the borrower.

3. Under normal operation, the redemption fee is given by the formula (baseRate + 0.5%) * Collateral drawn`

baseRate is decayed based on time passed since the last fee event

For example: The borrowing fee stands at 0.5% and the borrower wants to receive 4,000 SLSD to their wallet. Being charged a borrowing fee of 20.00 SLSD, the borrower will incur a debt of4,040 SLSD after the Liquidation Reserve and issuance fee are added.

Please note borrowing fee can be changed by the governance votings

Liquidation

You lose your collateral when your collateral value against your debt position surpassed 110% when Recovery Mode and 150% when normal mode. When get liquidated, a borrower will face liquidation “penalty” (10%).