Create Vaults
Last updated
Last updated
The "Create vault" feature allows users to deposit cryptocurrency assets as collateral and mint USDV stablecoin at a certain overcollateralization ratio.
â The choice of a vault depends on your strategy and risk tolerance. Each vault has different levels of risk, which allows deposits to be diversified into multiple vaults.
The user starts by clicking the "Create vault" button and chooses the cryptocurrency asset (as well as the amount) they wish to use as collateral. Smart contract will register a new vault behind the transaction signer (user) by minting a unique NFT. Once the user confirms the transaction, the cryptocurrency collateral will be deposited into a smart contract on the blockchain and the corresponding amount of USDV stablecoin will be minted and credited to the user's wallet.
Deposit
Deposit refers to the amount of digital assets that could be used as collateral to create a USDV stablecoin. To create a USDV stablecoin, a user must first deposit a certain amount of collateral into a USDV vault. The amount of collateral required depends on the type of asset being used as collateral and the current collateralization ratio.
Say a user wants to create USDV using FTM as collateral and the current collateralization ratio is 150%. The user would then be required to deposit 1.5 times the value of USDV they want to mint.
E.g., you can mint X amount of USDV with a 150% collateral ratio. If you deposit, for example, 1 000 FTM at the rate of $1.20, you can borrow a maximum of $1,200 / 150% = 800 USDV.
â Important notice - When we talk about collateral, it is highly recommended not to choose the minimum collateralization ratio at 130%. It would mean that the value of the collateral provided by the user is only 1.3 times greater than the amount of USDV borrowed. This leaves a relatively small buffer in case the price of the collateral drops, which can lead to the user's vault becoming undercollateralized and subject to liquidation. Maintaining a higher collateral level is generally advisable to mitigate the risk of liquidation and loss of funds.
Borrowing refers to the process of taking out a loan using USDV stablecoins. The borrow feature allows users to leverage their USDV holdings to obtain additional funds without selling their underlying assets.
You can only borrow USDV if you meet the vault's minimum percentage requirement. Each contract in a vault's pool has a fixed maximum amount of USDV it can issue.
If the value of the collateral falls below a certain threshold, the user may be subject to liquidation to repay the outstanding debt. Also, borrowing is limited by the vault's debt ceiling.
â It's important to note that borrowing in USDV involves risks, such as market volatility and the possibility of liquidation and you may lose some of your funds.
The repay feature in USDV refers to the process of repaying a loan taken by using USDV stablecoins. To use the repay feature, a user must first have borrowed USDV. They can then proceed to the repay section of the USDV platform and select the amount of debt they want to repay. The only way to redeem the collateral is to pay off the loan.
For example, a user has 100 USD worth of wBTC in the vault and a debt of 50 USDV.
In this case, the user will have 65 USD (130% of the total debt) worth of wBTC locked up and will be able to withdraw the rest.
To unlock the 65 USD in wBTC, the user must pay back 50 USDV. The system will charge a 1% settlement fee to the systemâs treasury. Note that the fee is deducted from the collateral token, not the repaying USDV. Upon full repayment, the vault balance would be reduced by 1 USD, which would be equal to 99 USD.
All USDV with which the repay was made are burned at this point. (Please ensure that you have enough tokens.)
This function allows the user to withdraw the vaultâs collateral to their wallet.
Withdrawal of collateral is only possible when the collateral is not locked. Hence, withdrawals canât reduce a vault's collateral below the minimum collateral coefficient.
When you move the slider, it adjusts the amount of the asset you want to withdraw, and the corresponding amount of USDV you will receive in return. The slider allows you to withdraw a portion of your assets while leaving the remaining balance in the vault, rather than withdrawing everything at once.
