Borrowing

Interest Free borrowing

Why borrow with Vaultedge:

With minimum Health Factor as low as 100.5%, Vaultedge provides greater capital efficiency than other borrowing systems, meaning users can secure the same loan with less collateral. Additionally, Vaultedge’s unique architecture allows it to offer exclusive collateral options.

Instead of selling tokens for liquidity, users or protocols can deposit in Vaultedge and borrow against them to receive veUSD.

Vaultedge also offers a unique solution for veToken holders, enabling them to access their yield in advance.

There is no recurring interest, no minimum debt, or deadline to repay the debt as long as there is a sufficient amount of collateral.

Borrowing process:

Borrowing is pretty straightforward if you understand a couple key things.

Users of Vaultedge can create a vault by depositing collateral assets and borrow our stablecoin, veUSD.

After you pay back your borrowed veUSD, you can withdraw your deposited collateral. Until then, your collateral is held in Vaultedge smart contracts as backing for the issued veUSD and a guarantee that the veUSD debt will be paid back.

You can take out a loan if the RAV (Risk-Adjusted Value) of your collateral is greater than 110% (or 1.1 times) your borrowed veUSD. The more collateral deposited, and the more safe vs. risky collateral you put in, the higher the "Risk-Adjusted Value." The ratio between collateral and debt in your vault is called your vault's "Individual Collateral Ratio" (ICR) .

When minting veUSD against your deposited collateral, you will receive the minted amount minus the issuance fee (which varies based on collateral type) and a liquidation reserve of 20 veUSD, refundable upon repayment of your veUSD debt.

Liquidations:

If your collateral drops in price, it will cause your ICR value to drop, and potentially may make your Vault eligible for liquidation. Luckily, stablecoin collaterals should not drop in value as long as the component stablecoins remain pegged. So adding stablecoins to your vault is a good way to prevent liquidation no matter what happens in the markets.

There are two system modes, Normal Mode and Recovery Mode. We expect the system to remain in normal mode the vast majority of the time. Recovery mode is an edge case designed to address significant systemic drops in collateral value. Recovery mode happens if the Total Collateral Ratio (TCR) falls below 150%. The TCR is displayed on the Dashboard page under "System Collateral Ratio."

In both Normal and Recovery Mode, you will be eligible for liquidation if your vault's collateral ratio is below 110%. But in Recovery Mode you are also eligible for liquidation if your AICR (Adjusted Individual Collateral Ratio) is less than TCR.

Vault Status	Normal Mode	Recovery Mode
ICR < 110%	Liquidation	Liquidation
110% < ICR and AICR < TCR	Can't be liquidated	Liquidation
110% < ICR and 150% < AICR	Can't be liquidated	Can't be liquidated

So if you keep your ICR above 110% and AICR above 150%, your vault can never be liquidated under normal mode or recovery mode.