💸Borrowing

Borrowing on MoonYield

Borrowing on the MoonYield protocol allows users to access MUSD, a USD-pegged stablecoin, by locking up MSS as collateral. Here’s how the borrowing process works in detail: Collateralization:

To borrow MUSD, users must deposit MSS into the protocol. This deposit creates a Vault, which secures the borrowed MUSD. Minimum Collateral Ratio: The collateral-to-debt ratio must be at least 130%. For example, if you borrow 1,000 MUSD, you must deposit at least $1,300 worth of MSS as collateral.

Borrowing Process: Open a Vault: Use the MoonYield interface to lock MSS as collateral.

Set Borrow Amount: Specify the amount of MUSD you want to borrow. The amount must not exceed your borrowing limit, determined by the collateral ratio.

Pay the Issuance Fee: A one-time fee (e.g., 2% of the borrowed amount) is charged at loan issuance. This fee is added to the total debt of the Vault.

Repaying Debt:

Borrowers can repay their debt at any time: Repayment Amount: The total borrowed MUSD plus any accrued fees. After repaying the debt, borrowers can reclaim their collateral.

Liquidation Risk:

If the collateral ratio of your Vault falls below the minimum requirement (130%), it becomes subject to liquidation: Liquidation Process: The protocol automatically sells a portion of the collateral to repay the debt. Penalty: A liquidation penalty is applied, reducing the amount of MSS returned to the borrower.

Benefits of Borrowing: Interest-Free Loans: Borrowers do not incur ongoing interest on their debt. Leverage MSS: Borrowers can use MUSD for trading, staking, or other DeFi activities without selling their MSS. Decentralization: The borrowing process operates without intermediaries, ensuring transparency and trustlessness.