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aETHc will be the first bond type token used as collateral on the OnX Lending protocol. As the DeFi space matures, bonds, LP tokens, and many other high liquidity collateral tokens will be added to the OnX Lending protocol.
As the first product on OnX.Finance, our lending platform is set to empower the use of collateralized tokens in new ways, starting with aETHc and ETH. By using aETHc as collateral to borrow ETH, users of the lending platform can earn interest and ONX rewards for both providing ETH to lend as well as collateralizing their aETHc. Among the immediate benefits of this process is the opportunity for aETHc stakers to take advantage of an increased position through a relatively safe process with low chance of liquidation due to the intertwined nature of aETHc and ETH. In addition, ETH holders will be able to earn a competitive APY on their assets.
How it works
- 1.Borrowing Ethereum using aETHc as collateral Borrowers can lock aETHc as collateral on the platform and earn ONX rewards while also borrowing Ethereum. Up to 75% of the value of the aETHc can be borrowed in ETH which can then be used to secure more aETHc (or utilized in other ways). The borrower maintains the accrued interest and keeps the lending ratio below 90% to help avoid liquidation.
- 2.Lending Ethereum for interest Lenders can add their ETH to the platform and earn ONX rewards as well as interest on their lent ETH. The loans will be collateralized with aETHc as security against any possible liquidations. The earned APY from lending will be variable with demand to ensure competitive rates.
- 3.Interest, Rewards, and platform fees 2/3rds of the interest generated will be paid to ETH lenders with the other 1/3rd going towards platform maintenance and a buyback and burn of ONX tokens. ETH Lenders will receive an additional 7X farming pool for staking their Ethereum as reward for providing the initial liquidity to the platform. Users collateralizing aETHc will also receive a 7X farming pool for ONX rewards. Both of these parameters are subject to governance voting from ONX holders.
Bob deposits 10 aETHc as collateral on the OnX lending protocol. He immediately begins receiving ONX rewards and is also now eligible to borrow up to 75% of his collateral value in Ethereum. Let’s also say that Alice has now put 10 ETH on the platform for lending. She will also immediately begin receiving ONX rewards and will be eligible to earn a share of the interest generated by the platform. Now let’s say that Bob is ready to borrow some ETH and decides to take 5 ETH on loan. He will now be accruing interest on his loan, 2/3s of which will eventually be paid to lenders like Alice.
What’s under the hood?
Borrowing rate = a + b*E*x
Saving rate = (borrowing rate -a)*x
a is the reward rate in ONX (starts at 0.5)
b is an arbitrary number adjustable from number 0–1 (starts at 0.9)
E is ETH 2.0 staking rewards
X is utilization rate
*Note, variables a and b are subject to governance of ONX holders.