C.R.E.A.M.: Dairy For Beginners
The world of DeFi can be a complex and confusing place, with multiple layers of services and products offering a whole range of exciting features. Many people are now dipping their toes into the milky, sometimes murky, world of decentralized finance, so we wanted to give those users an overview of C.R.E.A.M.’s key offerings and how they work, ahead of the highly anticipated rollout of C.R.E.A.M. v2.
Borrowing & Lending, Skimmed.
So, firstly, why would one wish to borrow or lend their tokens within the C.R.E.A.M. platform? Well, to:
- Earn interest. Supply your assets to the C.R.E.A.M. platform in order to earn a tasty pro-rata reward. This is variable depending on the demand and total value locked in the platform, but is a great way to earn money on assets you would otherwise be HODLing.
- Take out a loan. Need an asset and don’t want to sell your crypto? Use your assets as collateral in order to borrow something else; an example might be borrowing USDT whilst depositing your ETH, allowing you quick access to fiat whilst still having reaping the benefit of an upward price trend on your ETH. Your assets can be risk if the price depreciates, so you have to be careful not to overextend yourself.
- Long an asset. Think an asset is going to go up in price? Borrow it through cream to profit! Let’s use Karen as an example; she’s long on ETH. She supplies 10 ETH to C.R.E.A.M., using it as collateral to borrow 4000 USDT. Karen uses Uniswap to swap the 4000 USDT for 6.7 ETH, which means she now has long exposure to 16.7 ETH, and owes C.R.E.A.M. 4000 USDT. If ETH/USDT increases in value, Karen will be able to repurchase the 4000 USDT she owes C.R.E.A.M. for less than the 6.7 Eth she paid. She can then repay her debt, and keep the excess ETH as profit.
- Short an asset. Think an asset is going to go down in price? Borrow it through C.R.E.A.M. to profit! Let’s use Donald as an example; he’s short on CRV. He supplies 10 ETH to C.R.E.A.M., and uses it as collateral to borrow 5,000 CRV. Donald then swaps his CRV for 7 ETH on Uniswap, giving him 16 ETH worth of exposure, whilst owing C.R.E.A.M. 5,000 CRV. If CRV/ETH decreases in value, Donald is able to rebuy the 5,000 CRV he owes for less than 7 ETH. He can then repay his debt, and keep the excess ETH as profit.
Add 100ml Of Cream: Supplying.
But how do you get started in this world of rich, thick white goodness? Well, earning money is easy; you just have to deposit your assets on the platform.
When you first connect your wallet to C.R.E.A.M., it can look a little overwhelming. That’s because C.R.E.A.M. has one of the largest number of assets to lend or borrow out of any platform, with the list being constantly reviewed and voted on by $CREAM holder-led governance. However, to make some milk on the side, all we need to do is supply to the platform. Click on the grey toggle next to the asset you’d like to lend, and it will be confirmed via your wallet.
Once you have supplied your asset (in this case ETH) you’ll see a C.R.E.A.M. denominated token in your wallet (in this case, crETH). This represents your share of the supply. And that’s it! Your ETH will earn interest until you withdraw.
Lend Fresh, Borrow Clotted? Borrowing on C.R.E.A.M..
Want some more dessert with your C.R.E.A.M.? Borrowing is the next step, but there’s a little more to think about. Firstly, there’s a limit on how much you can borrow, which is determined by the collateral factor linked to the assets you’ve supplied. It’s different for each asset and is decided by the C.R.E.A.M. DAO. You can access the latest list here.
The collateral factor for your assets determines your borrow limit, for example, if you supply 100 USDT , and the current collateral factor for USDT is 70%, then you can borrow at most 70 USDT worth of other assets at any time; with multiple assets, C.R.E.A.M. works out the total borrow limit combining all the collateral factors. The borrow limit is shown when you try and borrow anything, as shown below.
If the price of the supplied or borrowed assets changed, your ‘borrow limit used’ percentage will also change. It’s good to keep your borrow limit low to start with; it’s suggested that 80% is a safe maximum limit for borrowing . This is due to the fact that once you reach 100% borrow limit, you are at risk of a percentage (normally 50%) of your assets being liquidated, or sold off, to service your loan.
Once you are ready to repay, you return the borrowed asset and are able to withdraw anything you have supplied, bringing us full circle. Congratulations, you’ve just tasted a dairy-powered bank-less future!
Cream In Your Refrigerator
C.R.E.A.M. DAO is powered by the $CREAM token, distributed earlier this year to users of the C.R.E.A.M. platform via fair launch yield farming. Key decisions on new assets listed, collateral factors and rewards are determined via governance vote; $CREAM token holders receive voting power on a 1–1 basis to the amount of $CREAM held. Voting takes place off-chain using Snapshot, and is really easy to use; you can simply click on a proposal and choose ‘For’, ‘Against’ or any of the other options. All new assets start with a 0% collateral factor, with the community deciding over time to allow them to be used against borrowing and at what level.
You can also lock up your $CREAM tokens for a set period within the ‘Rewards’ section of the site, allowing you to earn even more $CREAM tokens on top.
By holding the $CREAM token, you can become an active participant in the governance of the platform, by helping to grow the number of assets, decide the future of the platform, and expand the community.
An even smoother CREAM…
So, with the conclusion of our beginners guide to the smoothest product around, we look to the future of dairy based finance. You may well be aware of our integration with yEarn, but we have a whole raft of future silky improvements in line with the imminent rollout of C.R.E.A.M. v2. Keep a close eye on our socials to be first in line to find out about future tasty features.