Use $TRADE as Collateral Now on Timeswap – Earn 3 Digit Yields

Greetings, RWA Maxis. We’re thrilled to announce the $TRADE token as collateral on Timeswap offering enticing incentives in $TRADE and $TIME in 2 pools on Polygon PoS.

Before we dive into the know-how let’s first understand more about Timeswap. Timeswap is an AMM that’s all about fixed-term non-liquidatable loans. But how do these non-liquidatable pools work, what happens to your tokens, and what assumptions you should roll when putting your $TRADE as collateral? We’ll answer it all.

A Timeswap pool has a few key things you should know:

Asset Pair

Think of it like X and Y tokens, where X is the main asset and Y is secondary, and the other A and B. Let’s say:

X is $TRADE (borrowable asset), and Y is USDC.e (collateral)

A is USDC.e (borrowable asset) and B is $TRADE (collateral)

LTV & Transition Price

USDC.e/$TRADE Pool

For every 1 $TRADE token you use as collateral, you can borrow 0.55 USDC.e. The transition price is set at 0.55 $TRADE/USDC.e.

If you have 10 $TRADE tokens and decide to use them as collateral, according to the transition price, you would be able to borrow 5.5 USDC.e (10 $TRADE * 0.55 USDC.e/$TRADE).

Now, the current market price for $TRADE/USDC.e is around 1.16. This helps us calculate LTV, which is a measure of risk. The LTV ratio in this case is approximately 47%.

In simpler terms, the transition price and LTV ratio indicate how much you can borrow relative to the collateral you provide. The 0.55 transition price is a factor in determining this, and at the current market price, it suggests a borrowing limit that corresponds to a 47% LTV ratio.

$TRADE/USDC.e Pool

The transition price is set at 2.00 $TRADE/USDC.e, indicating that for every 2 USDC.e you use as collateral, you can borrow 1 $TRADE token.

If you decide to use 10 USDC.e as collateral; according to the transition price, you would then be eligible to borrow 5 $TRADE tokens (10 USDC.e / 2.00 USDC.e/$TRADE).

In this scenario, the LTV ratio is approximately 58%.

APR

You can see the APR at any time when you borrow and lend. You can refer to Timeswap’s Gitbook to learn more about APR movements.

Boosted APR: On Timeswap, there are two distinct pool types, each presenting unique yield opportunities:

  • Boosted Pools: These pools provide attractive yields in the form of $TRADE and $TIME rewards.
  • Non-boosted Pools: While lacking token incentives, these pools offer high real yields driven by heightened borrowing demand.

**$TRADE pools are boosted in nature.

Maturity Date

This is how long the pool lasts. Borrowers must repay their debt by this date, or they lose their collateral. Lenders get their locked-in interests in full on the maturity date. In our case, the pool maturity date is 8 weeks i.e., March 13th, 2024. If borrowers play by the rules and repay their loan, they unlock their collateral by paying back both the debt and interest. Lenders, in turn, get back their principal amount plus the interest. But, if borrowers don’t hold up their end of the bargain and default, they get to keep what they borrowed, but lenders get compensated with the forfeited collateral from the borrowers. It’s a balance between repayment and forfeiture.

Utilizing $TRADE on Timeswap

Timeswap has introduced two isolated lending markets for $TRADE, enhancing utility for the Polytrade community:

$TRADE/USDC.e Pool

For lenders:

  • Deposit $TRADE tokens to lend.
  • Risk: Your $TRADE gets converted to USDC.e if the price > $2 (the borrower might not return the $TRADE, you will be left with collateral).

For borrowers:

  • For example, provide 2 USDC.e as collateral and, in return, borrow 1 $TRADE.
  • No risk of liquidation.
  • NOTE: Remember to pay back your loan by 13th March or you will forfeit your USDC.e collateral.

At the time of maturity, if the pool’s transition price is higher than $TRADE
Price at Maturity/UserBorrowers (borrow $TRADE using USDC.e as collateral)Lenders (deposit $TRADE to earn interest)
$TRADE > transition priceDefault on loan (keep $TRADE debt and forfeit USDC.e collateral)Receive USDC.e from locked collateral
$TRADE < transition pricePay back $TRADE debt and interest to get USDC.e collateral backReceive $TRADE principal and interests

USDC.e/$TRADE Pool

For lenders:

  • Deposit USDC.e to lend.
  • Risk: Your USDC.e gets converted to $TRADE if the price < $0.55 (the borrower might not return the USDC.e, you will be left with the $TRADE collateral).

For borrowers:

  • For example, provide 1 USDC.e as collateral and, in return, borrow 0.55 $TRADE.
  • No risk of liquidation.
  • NOTE: Remember to pay back your loan by 13th March or you will forfeit your USDC.e collateral.

At the time of maturity, if the pool’s transition price is lower than $TRADE
Price at Maturity/UserBorrowers (borrow USDC.e using $TRADE as collateral)Lenders (deposit USDC.e to earn interest)
$TRADE > transition pricePay back USDC.e debt and interest to get $TRADE collateral backReceive USDC.e principal and interests
$TRADE < transition priceDefault on loan (keep USDC.e debt and forfeit $TRADE collateral)Receive $TRADE from locked collateral

Note: Lending/borrowing positions can be closed early given there is enough liquidity.

How to Take out a Loan?

Use/lock $TRADE as collateral and borrow USDC.e to unlock liquidity.

How to Leverage $TRADE?

If you’re bullish and want to leverage loop $TRADE i.e., use $TRADE to borrow USDC.e and repeat/loop it up; this way you develop a leveraged long position on $TRADE with no liquidations.

Creating a Perfect Yield Strategy

One can create a perfect yield strategy by combining both pools. Combine the pools in the following manner:

Borrow – Utilise token incentives to subsidize your borrowing cost using the boosted pools.

Lend – Lend into the non-boosted pools with high yields.

Leave a Comment