🏛️Borrowing

What is a Vault?

A Vault is a digital container used to take out and manage a loan on UWU Protocol. A Vault is associated with a specific Stacks address, and each address can have up to 20 Vaults open at the same time.

Vaults hold two balances: collateral in the form of STX and debt in the form of UWU. Users can adjust these balances by depositing or withdrawing collateral and borrowing or repaying debt. As these balances change, the collateral ratio of the Vault will adjust.

The address linked to a Vault controls all actions for the Vault unless it is liquidated. Users can close their Vault at any time, as long as its debt has been repaid and the collateral has been withdrawn.

What is collateral?

Collateral refers to the asset that a borrower provides as security for a loan. UWU Protocol only accepts STX as collateral.

What is a collateral ratio?

A collateral ratio is the ratio between the dollar value of the collateral held in a Vault and the amount of debt borrowed in UWU. This ratio will change as the price of STX fluctuates. To influence a collateral ratio, users can adjust the collateral and/or debt in their Vault, such as by depositing more collateral or repaying some of the debt.

Vaults are required to maintain a minimum collateral ratio of 150%.

What are the borrowing limits?

The minimum borrowing amount is 25 UWU when opening a Vault and 1 UWU when borrowing from an existing Vault. There is no maximum borrowing amount as long as you provide enough collateral to maintain a collateral ratio of at least 150%.

Vaults must maintain a minimum debt balance of 25 UWU at all times. When you repay your debt, your Vault's outstanding debt must be at least 25 UWU after payment; otherwise, you must repay the debt in full.

What fees do I pay when borrowing?

Every time you borrow from a Vault, a one-time 100bps (1.00%) borrow fee is deducted from the borrowed debt. For example, if you borrow 100 UWU, you'll receive 99 UWU after the borrow fee is deducted. Your total debt will remain 100 UWU, and you will need to repay the full amount when you settle your debt.

When do I have to repay my debt?

As long as your Vault maintains a minimum collateral ratio of 150%, you can keep your Vault open and repay your debt at any time.

What happens if my Vault is liquidated?

If your Vault is liquidated, you will lose ownership of the Vault, and liquidators will be able to acquire the collateral held in the Vault. To avoid liquidation, your Vault must maintain a minimum collateral ratio of 150%. If your Vault is liquidated, you will no longer have to repay the UWU that was borrowed.

It's important to monitor your Vault and manage its collateral ratio to prevent liquidation.