FAQs
Why would I use Stark-Fi for borrowing ?
Stark-Fi offers interest-free loans and is more capital efficient than other borrowing systems (i.e., less collateral is needed for the same loan). Instead of selling ETH to obtain liquid funds, users can lock up ETH as collateral, borrow USFI against it, and repay the loan at a future date—all without any interest charges.
For example, this borrowing system enables users to leverage their ETH positions multiple times. This can be achieved by minting USFI, selling it on the open market to buy more ETH, and repeating the process. However, this strategy carries significant risk and should only be used by experienced investors.
What is a Trove ?
A Trove is where users take out and manage their loans. Each Trove is linked to a unique Ethereum address, and each address can only have one Trove.
If you’re familiar with Vaults or CDPs from other DeFi platforms, Troves function similarly. They hold two balances:
Collateral (ETH)
Debt (USFI)
Users can adjust their collateral-to-debt ratio by adding more ETH or repaying USFI. A Trove can be closed at any time by fully repaying the debt.
How many Troves (loans) can I open with the same address ?
You can have multiple open Troves for the same collateral or across different collateral types, all represented as separate NFTs.
Are Troves transferable ?
Yes, they are represented as a NFT (ERC-721), hence easily transferable between wallets. When you send the NFT you also send full access to your Trove and all the funds within it.
Please note that more advanced strategies like ‘selling’ Trovess on secondary markets like OpenSea comes with inherent risks, and caution is advised.
What is the collateral ratio ?
The collateral ratio is the ratio between the USD value of the collateral in a Trove and its debt in USFI. This ratio fluctuates over time as the price of ETH changes.
Users can influence their collateral ratio by :
Adding more ETH collateral
Repaying some of their debt
For example:
If ETH = $3,000 and a user deposits 10 ETH as collateral while borrowing 10,000 USFI, their collateral ratio is 300%.
(10ETH × 3000)/ 10,000 × 100% = 300%If they instead borrow 25,000 USFI, their collateral ratio would be 120%.
The Max LTV Ratio (Loan-to-Value Ratio) is the maximum ratio at which a loan can be taken against collateral before the position is at risk of liquidation. For ETH, the Max LTV Ratio is 90.91%. This means that for every $1 of collateral, you can borrow up to $0.9091 in USFI.
The collateral ratio refers to the ratio between the value of your collateral and the value of the debt you've taken out. As the collateral ratio decreases (due to a drop in the value of your collateral), the LTV ratio increases, bringing your position closer to the liquidation threshold.
To minimize the risk of liquidation, it is recommended to maintain a collateral ratio significantly higher than the maximum LTV ratio — ideally above 150% or even 200%—to provide a safety buffer against market fluctuations.
Example:
Let’s say a user deposits 10 ETH when ETH is priced at $3,000 and borrows 25,000 USFI.
The initial collateral value is 10 ETH * $3,000 = $30,000.
The borrowed amount is 25,000 USFI.
The LTV Ratio = Borrowed amount / Collateral value = 25,000 / 30,000 = 83.33%.
Now, if the price of ETH drops to $2,750:
The new collateral value is 10 ETH * $2,750 = $27,500.
The new LTV Ratio = 25,000 / 27,500 = 90.91%.
In this scenario, the LTV Ratio has reached the Max LTV Ratio of 90.91%, which is the threshold before the Trove risks liquidation. If the LTV ratio exceeds this value due to further declines in ETH’s price, the position will be subject to liquidation.
What is SFI ?
SFI is the utility token of Stark-Fi, designed to capture fee revenue and incentivize early adopters of the platform.
SFI is a non-inflationary ERC-20 token with a maximum total supply of 10,000,000.
SFI rewards go to :
Stability Providers – Users who deposit USFI into the Stability Pool.
Liquidity Providers – Users who provide liquidity to trading pools within Stark-Fi.
These rewards are preprogrammed into the protocol and do not represent a claim against protocol developers or third parties.
Why SFI is a True Utility Token ?
SFI is not just a governance or speculative asset—it has tangible, built-in value across multiple functions :
Earn from staking & platform fees
Supply reduction through buyback & burn
Cross-platform adoption through partnerships
Active user rewards & incentives
This ensures that holding and using SFI provides direct benefits, reinforcing its status as a real utility token within the Stark-Fi ecosystem.
How do I benefit as a Stability Provider from liquidations ?
For example :
Assume there is 1,000,000 USFI in the Stability Pool and a user has 100,000 USFI deposited (i.e., 10% of the pool).
Now, a Trove with 200,000 USFI debt and 400 ETH collateral is liquidated at $545 per ETH, meaning its LTV's Ratio was 91.7%.
Because the user holds 10% of the Stability Pool, they absorb 10% of the liquidated debt (20,000 USFI). Their deposit decreases from 100,000 USFI to 80,000 USFI.
In return, they receive 10% of the liquidated ETH (40 ETH), currently worth $21,800.
⇒ Net gain from liquidation: $1,800
Under normal conditions, depositors can immediately withdraw the received ETH and sell it if they expect its USD value to decline.
How does the system compartmentalize risk among different LSTs ?
This depends on the party in question:
Borrowers : Collateral risk is limited to the collateral asset held by the borrower. A borrower isn’t negatively affected by a failure of another collateral asset.
USFI Holders : As a multi-collateral stablecoin, USFI is reliant on effective liquidations of undercollateralized loans in every borrow market to remain overcollateralized. Holders are subject to the risks of all supported collateral assets.
Earners : Stability Pool depositors only get exposure to the asset they have opted for. However, as USFI holders, they are similarly affected by potential depegging.
Last updated