3. Borrowing

Why would I borrow instead of selling my assets?

Selling your assets means closing your position on that particular asset. Hence, if you are long on the asset, you would not be entitled to the potential upside value gain. By borrowing you are able to obtain liquidity (working capital) without selling your assets. Users are mainly borrowing for unexpected expenses, leveraging their holdings or for new investment opportunities.

How do I borrow?

Before borrowing you need to deposit any asset to be used as collateral (check out the for more info). After this, simply head to the Borrow section and click on “Borrow” for the asset you want to borrow. Set the amount you need based on your available deposits that would be used as a collateral for the loan. Select either stable or variable rate and confirm your transaction. You can always change your rate afterwards as many times as you want.

How much I can borrow?

The maximum amount you can borrow depends on the value you have deposited and the available liquidity. For example, you can’t borrow an asset if there is not enough liquidity or if your Parch factor doesn’t allow you to.

What asset do I need to repay?

You repay your loan in USDC.

How much would I pay in interest?

The interest rate you pay for borrowing assets depends on the borrowing rate which is derived from the supply and demand ratio of the asset. You can find your current borrowing rate at any time in the Borrowings section of your dashboard.

How do I get interest for my Carbon?

Interest for you deposited ACC tokens are paid not in the token but in USDC, this is due to the fact that ACC tokens cannot be fractionalised.

What is the Parch factor?

The Parch factor is the numeric representation of the safety of your deposited carbon against the borrowed USDC and its underlying value. The higher the value is of your deposited carbon, the safer (drier) the state of your funds are against a liquidation scenario. If the Parch factor goes below 1, the liquidation of your deposits will be triggered. In this scenario 50% of the borrower’s debt is repaid by selling their collateral. The Parch factor depends on the liquidation threshold of your collateral against the value of your borrowed funds. Thus the higher your Parch factor the drier you are and the less likely you are to be liquidated.

What happens when my Parch factor is reduced?

Depending on the value fluctuation of your deposits, the Parch factor will increase or decrease. If your Parch factor increases (dries), it will improve your borrow position by making the liquidation threshold more unlikely to be reached. In the case that the value of your collateralised assets against the borrowed assets decreases instead, the Parch factor is also reduced (sweats), causing the risk of liquidation to increase.

How does Co2fi.io value deposited ACC?

Co2fi.io uses a pricing oracle which tracks the trading of the GNT (the underlying asset of the ACC token) on AirCarbon Exchange.

When do I need to pay back the loan?

There is no fixed time period to pay back the loan. As long as your position is safe, you can borrow for an undefined period. However, as time passes, the accrued interest will grow making your Parch factor decrease, which might result in your deposited assets becoming more likely to be liquidated.

How do I payback the loan?

In order to payback the loan you simply go to the Borrowings section of your dashboard and click on the repay button for the asset you borrowed and want to repay. Select the amount USDC to pay back and confirm the transaction.