Faq

Various questions we've been asked.

Q: What happens if a borrower does not repay at the end of the loan term?

When a loan term expires and the borrower has not repaid the debt, a liquidation is automatically initiated. The outcome depends on the borrower's available funds within the protocol:

• Case 1: Standard Liquidation (Sufficient Funds) If the borrower holds sufficient funds on the platform, the system will automatically use these funds to repay the lender in full, including both the principal and all accrued interest.

• Case 2: Collateral Seizure (Insufficient Funds) If the borrower does not have sufficient funds to cover the debt, the loan defaults. The borrower's locked collateral is transferred directly to the lender. The lender is then free to withdraw this collateral and sell it on the open market to recover their capital.

Q: What happens if the collateral's value drops significantly during the loan term?

FixedLend's model for handling collateral risk differs from typical lending protocols.

Unlike platforms that use price oracles to trigger automatic liquidations mid-term, FixedLend does not automatically liquidate a loan if the collateral value drops. The loan remains active until its predetermined end date.

• Borrower's Choice: The borrower can still choose to repay the loan at any point before the term expires, even if the collateral is underwater.

• End-of-Term Liquidation: If the borrower does not repay by the end of the term, the standard liquidation process described above occurs. The final outcome for the lender depends on the severity of the collateral's loss of value:

  • Minor De-Peg: If the value of the seized collateral is still greater than the loan amount, the lender may realize a profit.

  • Significant De-Peg: If the value of the seized collateral is less than the loan amount, the lender will incur a capital loss.

Risk Mitigation: To protect lenders, each asset market has a specific Loan-to-Value (LTV) ratio that provides a protective buffer. A lender only faces the risk of capital loss in the event of a de-peg or price drop significant enough to erase this entire LTV buffer.

Other related protocols

Pendle (not available on starknet) also allows user to fix their yield: http://pendle.finance

In depth article (not written by me) about p2p lending: https://www.bedlamresear.ch/posts/ob-lending

A non-exhaustive list of fixed yield dapp (mostly/all on EVM networks): https://cryptoyieldcurve.io/fixed-rate-ecosystem

Some inspiration from Solana: https://texture.finance | https://rain.fi

https://app.impermax.finance/markets Seems to do a bit the same idea, where you can leverage your AMM LP position by depositing it into a pool and borrowing with it, allowing borrowers to leverage their position and lenders to capture some of that profit without suffering from IL