Borrowing
Last updated
Last updated
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Scallop offers the flexibility for every user's Sui address to access up to 5 sub-accounts, including the primary account. This enables users to efficiently self-administer multiple positions concurrently. Once a user holds "Scallop Obligation Key", they can deposit into any sub-account without the need for repetitive approvals. Furthermore, no approvals are necessary to transfer assets and liabilities between sub-accounts, empowering users to easily isolate and segregate their collateral and debts according to their preferences.
We calculate your collateral and your debt inside an object called Obligation. To mutate this object you will need an object called Obligation Key, each Obligation Key belongs to an Obligation object. So when you create an Obligation object for the first time, you will get Obligation Key in return and it will be stored inside your address. This Obligation Key is just like an NFT, it represents ownership and it’s transferable. Transferring your Obligation Key to the other address means you hand over your ownership of the Obligation to someone else.
The Collateral Pools allow borrowers to deposit collateral and obtain a percentage of borrowing capacity, but suppliers cannot earn any interest from the collateral pool. Borrowers who want to borrow from the asset pool must first deposit collateral into the collateral pools, your collateral will be stored safely inside your Obligation object.
To control the ratio of coins that can be borrowed out using a collateral coin, we need a parameter called Collateral Weight in each of the Collateral Pools. For example, if you deposited 1 BTC to a Collateral Pool and the BTC price at the moment is $10,000. And the Collateral Weight of the BTC Collateral Pool is 70%. That means you can only borrow out 70% of your BTC coins value or equal to $10,000 x 70% = $7,000 .
Collateral Weight usually has a value below 1.
How much you can borrow from the assets pools depends on your collateral values. Your collateral value is determined using this formula:
Any changes regarding the Collateral Weight of a collateral pool that you deposited into will affect your Collateral Value.
There are multiple coins that have a volatile price. One of the solutions to protecting users from volatile coins, we create a borrow weight feature so borrowing a volatile coin will be much “expensive”. The terms of expensive here mean you can only borrow less volatile coins with such collateral. Borrow weight will affect the amount of debt you have. This is how your debt is calculated:
For example, there are SUI and USDC assets pools.
USDC has a more stable price than SUI, hence we set the Borrow Weight to be 1 and 1.25 respectively. and then you deposited 1 BTC that is worth $10,000 to the collateral pool with a Collateral Weight equal to 70% and your collateral value is $7,000 (70% of $10,000).
Let’s say the price of USDC is $1 and the price of SUI is also $1. With $7,000 you can borrow out 7,000 USDC but for SUI you can only borrow out 5,600 SUI.
Scallop implements a dynamic constraint on the total sum of loans and withdrawals permitted, which can be adjusted for each asset and pool. As an illustration, a limit of $1M may be set for borrowing or withdrawing from the primary pool within a single 24-hour timeframe.
A flash loan is a type of loan where a user borrows assets with no upfront collateral and returns the borrowed assets within the same blockchain transaction. From the blockchain's perspective flash loans are held for a duration of 0 seconds, Scallop charges 0.1% of the flash loan amount is allocated to the protocol as income. (ignoring Sui gas fee costs).
