A lending and borrowing guide for SpiritSwap lending network — Powered by Ola Finance
Lending is now live on SpiritSwap’s lending network, thanks to Ola.finance!
Earlier this week, we announced the launch of SpiritSwap’s initial decentralized lending network. This service runs using the Ola Finance lending protocol, adopting the configurations discussed in our previous article.
Here, we aim to provide you with a brief overview on how to actually operate with this powerful tool by supplying or borrowing your digital assets, on the SpiritSwap lending network.
Supplying and withdrawing liquidity.
Available digital assets include USDC, FTM, wETH, wBTC, BNB and of course, SPIRIT. In order to use the service one first needs to supply tokens to the network. This can be done using the MetaMask wallet extension (see below).
Once your MetaMask is connected, you will be able to see more information about the network and your positions in it (your wallet balances, supply balances, borrow balances, APY, etc.).
The screenshot below depicts the situation when one has just connected to the app without having interacted with it before.
You may see that the supply and borrow balances are zero, as they should be at this stage. The “Net APR” rate is the difference between the APR you may currently expect to receive from the collateral you supplied to the network and the APR you may expect to pay from the loans you have taken. It will be positive if you can expect to earn interest and negative otherwise.
The “Supply Markets” section is dedicated to depositing and withdrawing them from the network. It contains the name of tokens that you can supply, their current supply APY, and your connected wallet’s balance for those tokens. The latter indicates the amount of relevant tokens in your wallet that are not currently locked into other obligations or collateralized for borrowing.
Once you have chosen the token you would like to supply, you will need to select it and use MetaMask to “Approve” it. Then, you will be able to make the deposit, as shown in the image below.
If you want to redeem the tokens that you supplied (example demonstrated below), you simply need to press on the relevant token again (left side of the “Markets” table) and choose the amount you wish to withdraw. Note that if your tokens are being used as collateral for a loan at the moment you attempt to withdraw them, you may not be able to withdraw all of them right away.
Once you have supplied liquidity to the network, you may choose to enable it as collateral to take a loan. The image below depicts how to execute this within the lending interface.
Now that you have supplied liquidity and enabled it as collateral, you can now borrow tokens against it. To borrow, press on the token that you want to borrow (on the right section of the lending interface), and a pop-up will appear on your screen.
Borrowing is based on overcollateralization (see collateralization factor here). This means that in order to take out a loan, a collateral of a higher value must be provided. To discover the maximum dollar value you can borrow with a given amount of a collateral asset, you need to multiply it by the asset’s collateral factor. The collateral factors for each of the supported assets can be found by clicking on the “Markets’’ tab. The application also enables you to choose a maximum safe amount. It is recommended that you do not exceed the maximum safe amount to reduce your liquidation risk. You can read more about position liquidations on SpiritSwap Lending Network in our previous article.
The borrowing popup (see above) allows you to choose the number of tokens that you want to borrow. You can also press the “max safe” button. This will automatically fill in an amount equal to 60% of the maximum amount you can borrow. By design, the protocol will not allow you to borrow above the borrow limit for your asset.
Borrowers should bear in mind that loans on the lending network accumulate interest with each network block and that the interest compounds over time. This implies that to repay and close your position, you will need a higher amount of tokens than what you originally borrowed.
If you want to partially or entirely repay an outstanding loan, you simply need to press on the relevant token on the right section of the network’s “Markets” page, choose the amount you would like to repay, and repay the loan amount plus accumulated interest.
While this article provides a brief overview surrounding the intricacies of SpiritSwap’s lending network, we highly recommend reading the Ola Wiki and doing your own research to gain indepth knowledge of this process. This will enable you to gain a better understanding of how the protocol works and the risks involved while using it.
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