RUJI Lending

RUJI Lending is a decentralized money market connecting lenders and borrowers of crypto assets. It enables lenders to earn interest on their tokens, and borrowers to secure loans against their crypto collateral.

Key Features

• Lending: Generate passive returns by lending out your tokens, with a fairly low risk profile (all loans are overcollateralized). Lenders supply assets in exchange for a receipt token (xTOKEN), which accrues interest over time. The xTOKEN is transferable and can be used in other dApps, or redeemed back for the original asset plus accrued interest. Deposits can be withdrawn at any time, as long as asset utilization remains under 100%.

• Borrowing: Unlock liquidity in the form of overcollateralized loans, without selling your crypto assets. Borrowing is permissionless; no credit checks or lengthy applications required. No minimum or maximum loan duration, you can partially repay or fully close your position at any time.

• Overcollateralized: All loans are overcollateralized, meaning that at a maximum (illustrative) 75% Loan-To-Value ratio (LTV), there is always >$1 of collateral backing each $0.75 worth of debt.

• Isolated Markets: Each collateral_token/debt_token pair corresponds to a separate lending market, with its own risk parameters. Maximum LTV and borrowing cap are set market-by-market, based on available on-chain liquidity ensuring that, in case of a sudden and material drop in price, there should be enough liquidity to facilitate orderly liquidations. This allows for a more granular control of risk and reduces the risk of bad debt propagating into the system.

• Variable Interest Rate: Borrowers are charged variable interest rates based on the utilization rate, which is a function of supply and demand for a given asset (utilization = total_borrowed / total_supplied). The interest rate curve (available in the UI for each market) typically starts at 2% borrowing APR when utilization rate is 0%, and increases linearly toward 8% APR when utilization rate reaches 80%. Beyond that point, the borrowing APR increases sharply towards 300% when utilization rate reaches 100%. This dynamic incentivizes new suppliers when markets are hot and encourages borrowers to unwind their positions.

• Liquidations Powered by Rujira Engine: If a debt position exceeds its safe LTV limit (either because of the value of the collateral dropping, or the value of the debt increasing due to interests), a portion of the collateral becomes available for liquidation to bring the position back to a safe level. The at-risk collateral can be acquired at a discount to market value via Rujira's Liquidation Engine, using a Dutch auction to determine the discount.

Benefits

• Low-Risk Return: Earn interest on your crypto assets by lending them out with a fairly low repayment risk (overcollateralized loans) and no exposure to Impermanent Loss (single-sided deposit, as opposed to deposits in the AMM pools which comprise two assets and are subject to IL risk).

• Permissionless Borrowing: Easily take a loan against your crypto assets, whether it is to speculate on the markets, or to pay for real-life expenses.

• Native Assets Support: Earn interest or borrow against all native assets connected to THORChain (including BTC, ETH, BCH, DOGE, etc.), no need for bridged or wrapped version. Main Cosmos assets are also supported.

• Fair Liquidations: In case of adverse price movements for borrowers, liquidations are handled by Rujira's Liquidation Engine which allows everyone to bid on at-risk collateral via a Dutch auction mechanism. This creates a competitive market for liquidations, which tend to result in lower liquidation penalties for borrowers vs. traditional money markets where the liquidation discount is fixed.

• Efficient Integration: Fully integrated into Rujira's product suite, RUJI Lending enables leverage features in core apps such as spot margin trading on KUJI Trade and leveraged market making on KUJI Pools. This leads to increased borrowing volumes, increased liquidity on the orderbook DEX, higher spot trading volumes and more liquidation opportunities.

• Intuitive UX: Simplifies the process of lending and borrowing assets.

Fees & Fee Sharing with THORChain Base Layer

• Borrowers are charged an interest rate (borrowing APR) which is updated each block based on the utilization rate of the borrowed asset compared to the total supplied for lending.

• 90% of the interest charged goes to lenders and 10% is kept as protocol revenue, which is shared 50/50 with THORChain Base Layer.