Loans

How to Borrow

• Mechanism: Users can borrow BNB using JOO as collateral.

Loan Terms

• Collateral Requirement: Users can borrow up to 99% of their JOO's value in BNB (99% Loan-to-Value Ratio).

• Duration: Minimum 1 day, Maximum 365 days.

• Interest: Interest rates are calculated on a linear scale with a base rate of 0.05%. Interest is collected up front, or upon initiation of a loan, from the borrowed amount.

• Liquidation: If a loan defaults, then the JOO collateral is burned. Since loans are over-collateralized, burning the collateral causes the ratio of BNB per JOO to increase. JOO collateral from liquidated positions are burned collectively, every day, at 00:00 UTC.

JOO Burning Example (Liquidation)

Let’s say there are 100 JOO tokens in existence, and there are 100 BNB backing them on the contract. That means the price of 1 JOO is 1 BNB. A user can take a loan that is 99% of their JOO's value. In this case, they use 100 JOO to borrow 99 BNB.

The user fails to repay their loan on time, leading the position to be liquidated. 99.7% of the collateral, or 99.7 JOO, is burned and the remaining 0.3%, or 0.3 JOO, is distributed to LP incentives and the team.

Since the user's collateral was all of the JOO tokens in existence, the only JOO tokens that remain are the 0.3 JOO that were distributed. The user failed to repay the loan of 99 BNB, so there is now 1 BNB in the contract's backing. We can calculate the new price of JOO by doing 1 USDC / 0.3 JOO = 3.333... BNB. The price of every JOO token has increased!

For simplicity, this example does not account for interest, which further increases BNB backing per JOO.

Instant Default (Redeem JOO for BNB)

Similar to how JOO can be minted from the contract by depositing BNB, JOO can also be burned for the underlying BNB:

• The redemption process involves taking a single day loan against your JOO and purposefully defaulting. This allows you to walk away with the underlying BNB while your JOO are burned.

• Instant defaults are subject to the same 1% collateral premium and interest rates as other loans.