MXRP Lending System

MXRP Lending System Overview

The MXRP Dex incorporates a robust lending system designed to facilitate borrowing and lending of MXRP tokens, providing users with flexibility and liquidity within the ecosystem.

Key Features

No Interest:

• Borrowers do not pay interest on the loan. Instead, they incur two fees: an initial fee at the loan's outset and a repayment fee at the loan's conclusion.

• The initial fee is 0.5% of the loan amount.

• The repayment fee also amounts to 0.5% of the loan.

Collateral-Based:

• All loans are collateralized, ensuring that the collateral value exceeds the loan amount.

• MXRP tokens can only secure loans in MXRP, preserving the token denomination.

Anti-Liquidation Mechanism:

• Loans are issued in the same currency as the collateral, and borrowers select their loan duration, making the system resistant to liquidation.

• This protects borrowers from collateral liquidation risks due to price fluctuations.

Time-Based Locking:

• Loans are available for durations up to 548 days (1.5 years).

• The collateral ratio decreases as the loan duration extends.

Collateral Ratio Formula:

• The collateral ratio R(T) is calculated linearly:

• R(T) = -0.000684 multiplied by T + 0.9756R

  • R(T): Collateral ratio at time T (loan duration in days).

  • T: Loan duration.

  • −0.000684: Daily rate of decrease in collateral ratio.

  • 0.9756: Initial collateral ratio at T=0 days.

Repayment and Default

Repayment:

• Borrowers reclaim their collateral minus the repayment fee upon timely loan repayment.

Default:

• Failure to repay within the agreed duration results in forfeited collateral equivalent to the loan amount, with any surplus returned to the borrower. The loan duration includes the specified locking period.

Yield and Locking Period

Lenders:

• Lenders receive a competitive 7% APY within the MXRP lending system.

• If the DEX cannot in the unlikely event pay the APY it will pledge some MXRP tokens to the Lenders.

• If lenders take out there funds from the lending pool early they forfeit there 7% APY rewards.

Borrowers:

• Borrowers can stake their collateral to contribute to paying off their loan. The locked tokens earn them a yield, ensuring they contribute to the repayment if the loan exceeds a year in duration. This is the only ability their locked collateral can provide them.

Liquidation and Pool Utilization

• When liquidated, collateral, including fees, enters a pool. This pool converts into various tokens (cross-chain compatible) distributed to borrowers.

• The collateral pool is staked on different platforms by the DEX itself. Any surplus collateral is restaked, enabling users to earn across various chains or the same chain.

Distribution of Pool Assets

• MXRP Development Fund: Receives 20% of collateral.

• DEX Owner: Receives 5%.

• Borrowers: Receive 75%, with any extra allocated back to the collateral pool for restaking (done by the DEX itself).

Benefits

• Cost-Effective: No interest minimizes borrowing costs.

• Secure: Collateralization ensures loan security.

• Flexible: Variable loan durations cater to diverse borrowing needs.

• Resilient: Anti-liquidation mechanism protects against collateral value fluctuations.

Use Case Example

A user pledges 1172.76 MXRP tokens as collateral for a 1,000 MXRP loan with a 180-day duration. The collateral ratio, calculated at approximately 0.85248, ensures loan stability until repayment. By providing a collateral amount slightly above the calculated requirement, the system maintains a strong security buffer.

The MXRP Lending System enriches the Dex ecosystem by enabling users to leverage their MXRP holdings without interest payments, fostering liquidity and financial empowerment within the MXRP community.