Tectonic
  • Introduction
    • What is Tectonic?
    • Fundamentals
      • Example of Supplying
      • Example of Borrowing
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    • Shorting Assets
    • Claiming TONIC Rewards
      • Auto Vault Emissions
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    • Understanding Liquidations
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    • Understanding Analytics
      • Glossary of Terms
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  1. Introduction
  2. Fundamentals

Example of Borrowing

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Last updated 1 month ago

Following the earlier example, John now wants to borrow CRO instead of redeeming his USDC:

  1. John uses his 5,000 USDC as collateral.

  2. With CRO's Collateral Factor of 75%, the maximum he can borrow is 3,750 USDC worth of CRO.

    • At the current exchange rate of 0.15 USDC per 1 CRO, this equals 25,000 CRO.

  3. However, John chooses to be cautious and borrows only 12,500 CRO, keeping his collateralization ratio at 50%.

  4. Assuming a 12% annual borrowing APY and constant USDC/CRO exchange rate, after 3 months, the interest adds up to:

    • 12,500 CRO × (12% ÷ 4) = 375 CRO

  5. Total repayment = 375 + 12,500 = 12,875 CRO

Important:

If CRO’s price increases during the loan period, the value of John’s debt rises. If this causes his collateralization ratio to exceed 75%, a liquidation event may occur—part of his loan will be repaid by selling some of his collateral to bring the ratio back within limits.