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Welcome to a new era in decentralized finance! ShapeShift is introducing a transformative step in decentralized finance with its new lending feature. Users can now lend their Layer 1 assets such as BTC and ETH and borrow assets across different chains using USD denominated debt with innovative terms:
Zero Interest: Say goodbye to high interest rates.
No Settlements: Your collateral is safe.
No maturity: Keep your loan as long as you want.
Whether you're an experienced DeFi user or just starting to explore the exciting world of blockchain, ShapeShift Lending offers a revolution in ease and security. Visit 👉
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For a limited time to celebrate the launch of this feature, ShapeShift has ZERO borrowing fees. Until the FOX community votes to add fees, app.shapeshift.com will be the cheapest place to borrow against your Ethereum and Bitcoin!
The Basics:
The amount of debt borrowers receive in proportion to the assets provided (collateral) is based on the Collateral Ratio (CR). Depending on market conditions, the CR can range from 200% to 500%.
For example:
If CR = 200%, you must provide $200 in $BTC as collateral to borrow $100 USDC.
If CR = 300%, you must provide $300 in $BTC as collateral to borrow $100 USDC.
Therefore:
CR 200% = 50% LTV (loan-to-value ratio).
CR 300% = 33.33% LTV (loan-to-value ratio) and so on.
A higher CR means that users must provide more collateral against the borrowed asset. The debt is denominated in TOR, a dollar equivalent, and can be repaid in any THORChain-backed asset, including stable coins.
Loans are now available for ETH and BTC as collateral, with more options such as BNB, BCH, LTC, ATOM, AVAX and DOGE coming soon. You can borrow any asset supported by ShapeShift, including ERC-20 tokens in Ethereum, Avalanche and more.
How to open a loan
Visit 👉
How to repay a loan
Visit 👉
Click on the "Your Loans" tab.
What makes ShapeShift Lending better?
Stress-free lending ShapeShift Lending uses THORChain on the backend to create the easiest cryptocurrency lending experience for users. By removing barriers around collateral (secure with no risk of liquidation), debt (0% interest to worry about) and loan terms (no maturity), the result is a stress-free experience.
0% interest, no payoffs, no maturity: how? The use of the innovative THORChain elements is part of a strategic design for the new ShapeShift lending feature. When a loan is opened, the collateral provided is changed to $RUNE and the difference between the collateral value and the loan value is burned.
More borrowers raise the collateral ratio, increasing the equity stored against the debt issued. By not pressuring borrowers to repay quickly, the system attracts more external capital, which increases the value and stability of the network, making loans more attractive and beneficial to both borrowers and ShapeShift. Therefore, there is no need for interest, settlements or maturities.
THORChain collateral ratio THORChain uses Layer 1 asset-backed collateral to issue dollar debt, holding the collateral as equity. The more collateral added relative to the depth of the liquidity pool, the higher the collateral ratio. Early participation is key to a safer system. Since there is no liquidation and no interest, borrowers may be less willing to repay loans, which increases the value of THORChain shares.
TOR Stablecoin: Internal Price Oracle TOR of THORChain is a unique internal price oracle that maintains the right price even during stablecoin volatility. It cannot be traded or held at this time, and its price is derived from the average price of all stablecoins in THORChain (USDC, USDT, BUSD, LUSD, GUSD, USDP, DAI, etc.).
Safety First: Risk Management and Extension
THORChain's lending parameters were designed to avoid excessive leverage or taking unfair risks for borrowers and THORChain. Block Science conducted a comprehensive report on the risks of THORChain's lending protocol, complete with economic simulations.
The credit security mechanisms include:
Throttling: THORChain aims to ensure that collateral is always secure and controls the speed of opening new debt through circuit breakers to avoid exceeding network liquidity.
Loan limits: loans are capped according to the outstanding supply of RUNE, which currently consists of a strict limit of 500M RUNE. ~15M RUNE are already burned due to BEP2/ERC20 RUNE not being updated.
To ensure safe scaling, at initial loan launch, only 1/3 of the burned RUNE (~5 million) was available for lending. More RUNE will be burned as loans open/close on favorable terms, and internal interchange fees between loans permanently burn RUNE, so the gap should continually increase. As more RUNE is burned and the gap grows, additional loans can be created.
Protection against $RUNE inflation If the price of RUNE drops dramatically versus collateral assets, then net RUNE inflation could occur due to excessive RUNE minting from total loan closings versus loan openings. THORChain Lending has a built-in circuit breaker to pause new loans and disable loans if mintage causes the total supply to exceed 500 million RUNE. In such a scenario, THORChain Reserves will step in to cover the remaining collateral payments. You can learn more here.
Frequently Asked Questions
Q. Can I partially pay off my loan? A. No. The debt can be partially repaid, but the borrower will only receive his or her collateral when the debt is paid in full.
Q. What happens if I overpay my debt? A. No. Overpayments are credited toward the borrower's next loan opening.
Q. Is there a better time to open or close a loan? Yes, it is best to open and close loans in times of low volatility. To protect the network from price manipulation, the depth of the virtual loan pool is reduced in times of higher volatility (liquidity fees can increase significantly). Managing loans in times of low price volatility on app.shapeshift.com will produce the most desirable results. Patient borrowers pay the lowest rates.
Q. Will I always receive a full refund of my collateral? You will receive your full collateral back at the time of payment less any diversion fees incurred during the loan origination and closing process. During periods of low volatility, rates will be lower. During times of high volatility, rates will be higher, as described above. Patient borrowers pay the lowest rates.
Q. Who provides me with the assets I can borrow? RUNE exchanges for the borrowed asset through the liquidity pools and then sends it to the borrower. Therefore, as long as THORChain pools are available, there will always be assets available to borrow. The greater the depth of the pool, the less slippage will occur.
Q. Where is my warranty stored? Collateral is exchanged to RUNE through the groups. In this way, no one "stores" collateral in escrow. As long as the THORChain pools are healthy and functioning, any collateral deposited will be exchanged to RUNE, followed by arbitrageurs who will rebalance the pools as usual.
Q. What happens if the value of my collateral drops? As stated above, the collateral was already changed to RUNE at the time of loan origination. Therefore, borrowers are not at risk if the collateral value drops. This is how THORChain Lending's zero liquidation design is achieved.
Q. Who is the counterparty to my loan? A.The THORChain protocol and all RUNE holders are the counterparty to each loan. The RUNE burn/accumulation mechanism means that RUNE is concentrated/diluted (among all RUNE holders) as loans are opened and closed. Liquidity providers and savers (profits) do not directly lend their assets to borrowers. Pools are only the conduit to swap between collateral and debt.
Q. With what assets can I repay my debt? The debt can be repaid with any asset backed by THORChain. The assets used to repay the loans will be sold by TOR to repay the debt, as the debt is denominated in TOR.
Q. Can I borrow more if my collateral increases in value? No, when a loan is opened, the full debt will be issued (at the current collateral rate). There is no option to borrow additional debt unless the borrower pays off the original debt, redeems the collateral in full and then reopens a new loan.
Q. Can I open another loan if I already have other loans? Yes, wallets with existing loan positions can open a new loan by depositing new collateral. The new debt will be issued based on the new collateral and the current collateral rate.
Q. When will loans be available for more collateral options? The lending protocol initially supports BTC and ETH. The functionality to support lending on all Layer 1 gas assets in ShapeShift (BNB, LTC, BCH, ATOM, AVAX and DOGE) is now available and validators simply need to enable it via mimir.
Q. Are loans compatible with Streaming Swaps? No. Debt issuance and loan repayment are subject to traditional time-optimized slippage. Use (link left out on purpose) for the most accurate estimates.
Documentation and Community Education
The best place to delve into THORChain Lending are THORChain Docs and Architecture Design Record (ADR). The THORChain community has also created a treasure trove of resources to help borrowers understand the mechanics of lending.
A new era in DeFi lending!
THORChain Lending on app.shapeshift.com is not just an evolution but a revolution for decentralized finance. By eliminating interest, settlements and maturities, borrowing becomes a much more accessible and stress-free experience. Visit app.shapeshift.com to explore borrowing yourself and experience the future of decentralized finance today.
Go for it! 💪🦊
About ShapeShift
ShapeShift is the leading multi-chain decentralized exchange (DEX) aggregator powered by THORChain, LiFi, 0x, 1inch, Osmosis, CoWSwap and more. Buy, sell, track, exchange and earn permissionless with Bitcoin, Ethereum, Atom, DOGE and more at the best rates at (Link left out on purpose).