Unit Protocol
How to borrow $USDP

Short version

Let's go through some fundamentals of using the Unit Protocol to borrow and create $USDP stable coin.
  • Choose token (collateral) in a dropdown list of available tokens as collaterals.
  • Scroll down to Deposit collateral and Borrow $USDP
  • Input numbers depend on your preferences and press Execute
  • Sign the transaction with Metamask etc.
  • Use your $USDP to do whatever you want to do
  • Go to Repay $USDP & Withdraw collateral to pay back your $USDP.
    • The amount you repay is the same as the amount of $USDP borrowed + the stability fee for the period you borrowed it.

Long version

The first thing you need to do is to connect your wallet. Click on this box to accept the terms and conditions, and then click on Connect Wallet. I have used my MetaMask to connect. As soon as that's set up we can move on to the next step.
Let's go through the process of borrowing $USDP with our tokens.
First, you need to decide which collateral you want to use. 'Collateral' means the type of token you want to use to borrow or create $USDP. In this example, we will be using Ether, so I just click on Ether from the list here.

Choosing collateral

The 'Choose Collateral' section
Before we get into it, it's important to pay attention to the figures shown here.
This lets us select the token we're interested in and see its basic parameters when used as collateral. Every term has a hint. If you press the information icon, you'll get a pop-up explaining the term. Anyway, let's define the key terms once more:
'Initial collateral ratio' is how much you can collateralize your token for. So, if I try to collateralize at 77% to borrow $1000, I'll be able to take out $770.
  • Initial collateral ratio(ICR), % - the debt/collateral ratio represents the maximum amount of debt a user can borrow initially (when opening CDP) with a selected collateral token.
    • For example, 40% means that for every $1000 collateral value, a user can borrow a maximum of $400 USDP initially.
  • Liquidation ratio(LR), % - the debt/collateral ratio represents the limit after which your CDP can be liquidated.
    • For example, 50% means that if the debt/collateral ratio will be >50%, the position can be triggered for liquidation.
    • LR>ICR creates a buffer to protect against instant liquidation if you borrow the maximum limit.
  • Stability fee, % - represents the cost of USDP debt per year. It capitalizes during every action, which reduces debt/collateral ratio like withdrawing collateral and borrowing more USDP.
  • Liquidation fee, % - a fee which represents a % from the loan. Will be deducted from collateral if liquidation will occur.
  • Available USDP to borrow with current collateral, USDP - the maximum amount of USDP which can be borrowed for selected collateral token.
    • In our case, it is 0 because all the available USDP limit was already taken for the DUCK token at that moment.
Next, is the Liquidation ratio. This is basically at how high of a percentage can the actual collateralised debt position be triggered for liquidation. The risk-level of your CDP is determined by how close you are to the liquidity rate. For example, the Initial Collateral Rate (ICR) for Ether is 77%, while the liquidity rate is at 78%. Meaning that if you go ahead and use the full limit of collateral at 77% you'll be just 1% away from being liquidated. That's why you should borrow below the ICR.
You can use the risk indicator to see how risky your transaction is.

Your balance

The next ratio is the Stability Fee. This risk parameter indicates the inherent risk in creating $USDP using different collaterals. That's why the stability rate for a stablecoin such as USDT is at 2%, while the same rate is 4% for Ether.
This section shows your wallet balances: DUCK, $USDP, and the selected token for collateral.
This fee represents the cost of $USDP debt per year. It capitalises during every action (like withdrawing collateral and borrowing more $USDP) which affects the debt/collateral ratio.
The Stability Fee is continuously compounding interest and totals the given percentage at the end of the year. For example, if I borrow $100 worth of $USDP at 10% stability fee, I will have to pay back $110 dollars at the end of the year.

Depositing collateral & borrowing USDP

Next is the Liquidation fee. This is the percentage from the loan which will be deducted from collateral in the event that liquidation occurs.
Enter the amount of the token you want to deposit as collateral and how much you would like to borrow.
And finally, we have the $USDP available to borrow with this collateral, Ether in this case.
Pressing the Max button for token collateral will enter your wallet balance for the selected token. The Max button for $USDP will calculate the amount of $USDP you will get based on the ICR ratio.
Now you're ready to enter how much Ether you want to collateralize against $USDP in the box provided. Below this, we can see the maximum amount borrowable against this collateral.
The Execute button will send the transaction to your wallet and ask you to sign.
Depositing collateral & borrowing $USDP
You can either use the slider to choose an amount or simply choose a percentage from the ones available. The higher the amount, the riskier the CDP. Basically, it will get riskier the closer you get to the liquidation point for the CDP.

Repaying $USDP and withdrawing collateral

So, you've already borrowed some funds and now you want to partially or fully repay your debt or withdraw collateral.
You can use Metamask or Wallet Connect for this.
The Max button for USDP will set the amount to the Borrowed $USDP + Stability fee for debt period.
The Max button for collateral will work out the amount of collateral you can withdraw based on your CDP parameters and current input. For complete withdrawal, press max for USDP to set full repayment first.
Repay $USDP & Withdraw collateral

Your CDP section

This section represents the situation with your selected collateral CDP. To switch between different CDPs, choose another token in the Choose collateral section.
Your CDP section
Let's take a look at the terms here:
  • Borrowed $USDP - the amount of initially borrowed USDP for this main collateral CDP.
  • Collateral amount - the deposited asset amount.
  • Liquidation price - below the collateral price the position(CDP) can be liquidated.
  • Utilisation - % of borrowed $USDP compare to maximum $USDP, which is possible to borrow for the CDP.
Last modified 24d ago