Borrowing FAQ

Why should you use borrowing instead of selling your assets?

Selling your assets means that you may miss out on the gains from the appreciation of your crypto assets. Borrowing allows you to use your funds without having to sell your position in the face of sudden capital needs. Also, in some jurisdictions, the sale of crypto assets will incur a tax, but borrowing also eliminates the need to pay the tax required to trade crypto assets.

What do I need to prepare in advance to borrow from DEFED?

Before you borrow any assets, you need to confirm if you have assets as a collateral in Defed. Then, browse to the "Borrow" section and click on "Borrow" for the asset you want to withdraw.

How much assets can I borrow?

The amount you can borrow will displayed on the page, it will be 75% of the value of your collateral nomorally.

Details as follows:

Name	Symbol	Collateral Ratio	Liquidation Threshold	Liquidation Bonus
Ethereum	ETH	82.50%	75.00%	6.50%
Wrapped BTC	WBTC	70.00%	85.00%	5.00%
USD Coin	USDC	85.50%	88.00%	4.50%

What is Health Factor?

When you completed borrowing activity, the account health factor will display a specific value that is used to show how healthy your current account is in relation to the value of your collateral. Note that when the account health factor approaches 1, the liquidation process will be triggered, and the liquidation process will automatically liquidate some of your assets and pay off any current unhealthy debt until the health factor is restored.

What assets can I use to repay the debt?

You can only use the same assets to repay debt.

How much would I pay for borrowing interest?

The interest you pay for borrowing depends on the borrowing rate, which is derived from the current supply and demand ratio of the asset.

When do I need to repay the borrowing?

There is no fixed term for the debt you borrowed on DEFED, you can keep borrowing as long as your health factor is greater than 1. However, during the period of borrowing, interest will continue to accrue, which will cause the health factor to drop. If your health factor drops close to 1 for other reasons, we recommend that you repay your loan in time to prevent liquidation.