Benefits of using OnX Finance Lending
OnX Finance Lending
Decentralized lending platforms base their protocol on the concept of Loan To Value (LTV). LTV compares the value of your borrowed asset and accrued interest to the value of your collateral. If the LTV crosses a certain threshold, a user faces the risk of losing his collateral.
Borrowers often suffer under market volatility. If their collateral loses value because of market conditions, then their LTV increases. Here is an example to demonstrate this risk: Bob deposits 1 ETH and decides to borrow 75 % of his ETH collateral in USDT. He receives a loan of 1725 USDT. The LTV is 75 % (1725 / 2300). The platform he uses has set a liquidation threshold of 100 %. Overnight the price of ETH drops by 30 %. His LTV increases to 107 %, above the liquidation threshold, and he loses his collateral.
1. OnX Finance has eliminated the threat of getting liquidated through market volatility.
A user provides aETH as collateral. aETH is ETH staked on ETH 2.0 through ANKR. The OnX lending protocol is calculating the LTV by comparing the ETH loan to the aETH collateral. Instead of using the market price of aETH, OnX uses an oracle provided by ANKR to read the actual value of aETH. No matter how much the value of aETH or ETH goes up and down, a user can not lose his collateral through market volatility.
According to the ANKR oracle, the current real value of 1 aETH is 1.033 ETH. Let's say Bob provides 10 aETH as collateral. The real value of his collateral is 10.33 ETH (10 * 1.033). If Bob then borrows the max amount (75 % of collateral), he gets a loan of 7.7475 ETH, and his TVL is 75 % (7.7475 ÷ 10.33).
2. OnX Finance enables long-term borrowing.
An essential property of borrowing on OnX Finance is the fact that aETH is gaining value. The only way how a user can reach the liquidation threshold of 90 % is by the interest they have to pay back. However, this can take a very long time. The aETH collateral gains value since it collects ETH 2.0 staking rewards.
From the moment Bob took the loan, his debt is accruing interest that must be repaid. After some time, he owes 0.5 ETH in interest on top of the 7.7475 ETH borrowed (8.2475 total debt). Also, let's assume the real value of aETH is 1.06 at that later time. The real value of Bob's collateral would be 10.6 ETH (10 * 1.06) and his LTV 78 % (8.2475 ÷ 10.6).
3. OnX Finance has the highest ETH supply APYs in DeFi.
Lending on OnX protects against market volatility and enables long-term borrowing. On top of that, OnX provides the highest supply APY on the market. As of the time of writing, ETH suppliers earn an APY of 20 %. On Compound supplied ETH only generates an income of 0.15 % per year. On OnX users received 130 times more.