Port Finance: An overview on lending, borrowing, and liquidations
We answer the questions that will help give you a better idea of what it looks like to use Port Finance.
Port Finance is a money market that exists within the Solana ecosystem; we leverage the speed of the Solana blockchain and aim to provide competitive lending and interest rate derivative products, with a plan to provide a basic lending protocol that allows users to enter leveraged positions.
When interacting with lending/borrowing platforms, users need to be aware of several factors: what assets can you use as collateral, what the interest rates are for lending and/or borrowing, how borrowing works, what liquidations are and what the risks associated with borrowing and lending are.
In this article, we break down the above and highlight the benefits of using Port Finance over other protocols across the DeFi landscape!
How collateral deposits work on Port Finance
One of the features that distinguishes us from other money market platforms is that we allow users to use multiple collateral types to create their position; users are able to deposit various stablecoins and assets to create one collateralized position.
In the beginning, we will allow users to deposit USDC, USDT, PAI, SOL and SRM as forms of collateral. The user can then bundle these together on our platform to define their borrowing power.
Loan to Value Ratio
A loan to value ratio refers to how much capital a user has access to based on the amount of collateral they deposit. In defi, lending and borrowing protocols generally require the user to over-collateralize their position in order to reduce risk to the lender and to account for volatility of the underlying asset provided as collateral.
Because the majority of the collateral that we accept is in the form of stablecoins, we offer a maximum 90% Loan-to-Value (LTV) and on more volatile assets such as SOL, we will allow users a maximum of 70% LTV. Users doesn’t need to use all of their available borrowing power. Doing so reduce the chance of having their position liquidated, which is something we will discuss a bit later in this article.
Interest rates are loosely defined as the rates that borrowers will pay to lenders/depositors over the duration of the loan and vice versa. On Port Finance, our interest rates are determined by the total borrowed amount of assets versus the total liquidity provided by lenders and depositors. We then use a predefined curve to determine the interest rates.
Volatility in regards to an asset’s price will play a role in interest rates. For example, more volatile assets will have more drastic swings in interest rates to incentivize more people to deposit into the liquidity pool. For stable assets (such as USDC, USDT, and PAI), the curve is more gentle and will change less drastically.
More information on the above can be found in our introductory article.
Users will also be able to earn yield on their assets by simply depositing their capital into Port Finance. More on this to follow soon, so stay tuned.
Liquidation events are triggered when a user’s collateral drops significantly in price, and exceeds a predetermined threshold, allowing other users to cover the debt of the position themselves in order to retrieve the liquidated collateral.
On Port Finance, we utilize third party liquidations in order to maintain overall health of the protocol. What this means is that we will allow users to scan through existing loans, searching for defaulted loans that can be liquidated. These users can then provide the necessary collateral to cover the debt of the loan, which in turn restores funds to the protocol while also allowing the liquidator to collect the collateral on the loan. Since these loans are overcollateralized, this creates a symbiotic relationship between the protocol and the liquidator.
Flash Loans are the first uncollateralized loan option in DeFi and we implement them on Port Finance to enable DeFi aficionados to arbitrage and more. Designed for developers, Flash Loan functionality enables participants to borrow instantly and easily, no collateral needed provided that the liquidity is returned to the pool within one transaction block.
If this does not happen, the whole transaction is reversed to effectively undo the actions executed until that point. This guarantees the safety of the funds in the reserve pool. Use-cases include arbitrage, collateral swapping, self-liquidation, and many more (Source: Aave)
We believe that while Solana offers a promising scalable, fast, and efficient solution to defi’s current needs, projects have been slow to build the necessary tools that enable users to maximize the efficiency of their capital. That is why we have made it our goal to bring seamless, easily accessible money markets to the Solana ecosystem.
By offering users flexible, attractive interest rates on their collateral, we hope to bring enough liquidity to Port Finance that users are able to borrow as much as they want to while paying very little in interest. As we near our IDO and official main-net launch, we hope to offer the most efficient money markets around!
It’s Nearly Time…
Make sure to keep your eyes peeled for updates about our upcoming IDO on Solanium on Saturday 7th August 2021!
Lottery results will be drawn on the 5th of August 2021 at 2 pm UTC.
Read more information related to the Whitelist Lottery here:
We are very excited to welcome many more members to the Port Finance community and hope to see you there!
About Port Finance
Port Finance is a decentralized Money Market protocol on Solana, aiming to provide a full suite of lending products including but not limited to: variable rate lending, fixed-rate lending and interest rate swaps. Port Finance’s team brings engineering experience from tech companies like Google, Facebook, and Microsoft, and previous contributions to Solana and Serum. Learn more about us here.