Lenders
Unlike peer-to-peer loans marketplaces, Unlockd operates with a much more efficient system of pooled liquidity.
Unlockd's liquidity pools are smart contracts responsible for locking tokens, ETH for instance, to ensure the liquidity of those tokens to be borrowed by users when they take out a loan.
Users of these pools, known as lenders, provide tokens to the smart contract for as long as they wish and receive uTokens, representing their share in the pool.
You can deposit any amount you want; there is no minimum or maximum limit. Still, it's important to consider that for really low amounts the transaction cost of the process might be higher than the expected earnings. It is recommended that you consider this when depositing very low amounts.
uToken holders receive continuous earnings that evolve with market conditions. Each asset has its own market of supply and demand with its own APY (Annual Percentage Yield) which evolves with time.
This yield comes from the interest that borrowers have accrued when they repay their loan, and may include UNLK token rewards in the future.
Unlockd's lending pools are designed to maximize your earnings and optimize the taxation derived from your profits by providing liquidity. When you deposit your assets and receive yield, it is automatically reinvested in the pool to compound and grow your return exponentially.
When you wish to withdraw the liquidity you are contributing you only need to return the uTokens you received when you deposited your liquidity. These tokens are burned by the protocol and you then get your assets back.
You would need to make sure there is enough liquidity (not borrowed) in order to withdraw, if this is not the case you would need to wait for more liquidity from lenders or borrowers repaying.
The main risk of providing this type of liquidity lies in the unlikely event that the borrower defaults and, upon liquidating its collateral, the volatility of the market results in the protocol receiving for it an amount lower than the original amount of the loan plus accrued interest. In that case, the liquidated collateral would not be sufficient to provide the stipulated yield or sometimes repay the lenders.
In the future, Unlockd's Multi-NFT Collateral will allow borrowers to provide as collateral several NFTs from different collections, minimizing the risk of liquidation.
Even in the event of a liquidation, the lending pools model mitigates this risk effectively by diluting the impact of these unusual events across the many users that make up our robust pool. Additionally, our liquidation and Dynamic LTV determination models are designed not to reach this point in the absence of extreme market conditions.
In the case of a liquidation, our smart liquidation system calculates in each situation the optimal liquidation setup, through traditional Auctions, Dutch Auctions with several variants and instant liquidation schemes through External Liquidation Pools.
Last modified 1mo ago