Borrowing & Minting
Last updated
Last updated
Pioneering user-set interest rates, Stark-Fi allows users to borrow the stablecoin USFI on their own terms. Borrowers can choose and adjust the rate they are willing to pay for their loans. Borrowers will establish market rates in accordance with their individual risk tolerance without relying on governance or algorithm rate management. Each collateral will also have their own respective borrow market which allows room for a market of rates to develop.
Stark-Fi builds on the fundamentals that introduced - a highly secure and immutable protocol which issues the most decentralized stablecoin in all of crypto.
All of this makes for a highly capital efficient, secure and decentralized borrowing experience which cannot be matched anywhere else.
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.
You can find more informations about Trove .
Loans issued by the protocol do not have a repayment schedule. You can leave your Trove open and repay your debt any time, as long as you maintain a healthy LTV.
There is no lockup period. Users are free to withdraw their collateral deposits whenever they want. As an exception, withdrawals by borrowers are temporarily suspended if the total LTV of a borrow market goes above 75%.
This depends on your personal preferences, primarily your risk tolerance and how actively you want to manage your position(s). To help with the decision, you'll find preset options on the user interface that can serve as a guide.
LTV quick-selection options
Please note that these examples are for illustration purposes only and do not represent definitive risk or safety thresholds. It's essential to determine your own risk tolerance and comfort level as a user.
If your LTV becomes too high, your position will be liquidated.
That depends on the collateral type you will use.
ETH will have a LTV of 90.91%
wstETH and rETH will have it at 83.33%.
STRK will have a LTV of 75%
Liquid STRK will have a LTV of 70%
BTC will have a LTV of 85%
To open a new Trove, the protocol requires a liquidation reserve of 1 USFI regardless of the chosen collateral, which is set aside to cover the gas costs of a potential liquidation. The deposit is returned when the Trove is closed by the user (including upon redemptions).
In Stark-Fi, there are no upfront fees. Instead, you pay interest on an ongoing basis, making it suitable for short-term loans as well.
The interest you pay is determined by the rate you set yourself. For example, if you borrow 10,000 USFI at a 5% interest rate, you'll pay ~500 USFI in interest after one year. This interest is added to your outstanding debt.
In Stark-Fi, users can set their own interest rates, giving them full control over costs and improving predictability. This feature allows for adaptability to various market conditions and helps stabilize USFI's peg.
User-set interest rates facilitate a capital-efficient equilibrium between USFI borrowers and holders in a fully market-driven manner. Additionally, these rates serve as the primary revenue source for USFI holders, generating a continuous, sustainable real yield for USFI depositors and liquidity providers.
Yes, you can always adjust your interest rate at any time. Since you as a user get to set your own interest rate, you have full autonomy over your borrowing costs.
Note however, that a fee corresponding to 7 days of average interest is charged when opening the loan, as well as on any rate adjustments that happen less than 7 days after the last adjustment. Without it, low-interest rate borrowers could evade redemptions by sandwiching a redemption transaction with both an upward and downward interest rate adjustment, which in turn would unduly direct the redemption against higher-interest borrowers.
Setting an interest rate determines a user’s redemption risk and needs to be aligned with your goals and how actively you want to manage your position.
Users can also decide to delegate interest rate management to a third party, who can set your interest rate and charge a fee for this service.
By opting to manage your own rate, you will have to weigh the savings from a lower rate against the higher redemption risk and the increased adjustment frequency with potential additional costs (premature adjustment fees and gas costs).
Since redemptions are performed in ascending order of interest rate (for the respective collateral asset), you will typically want to keep a buffer of other borrowers with lower rates in front of you. Choosing higher rates may increase the recurring costs of your loan, but give you peace of mind regarding unexpected market fluctuations.
You can see the distribution of other users’ rates in a histogram and position yourself accordingly.
Redemptions usually occur when USFI is trading below $1 minus the current redemption fee. Keeping an eye on the past redemption activity can help you assess the overall redemption risk, serving as an additional data point for your rate selection.
In general, those willing to actively monitor their positions, or borrowing for shorter periods of time, may opt for lower rates. Conversely users optimizing for a more passive, long-term position would be better off with setting a higher relative interest rate.
These will be set, continuously, by the market and will vary over time. We would expect that, on average, rates should be similar to borrowing on Sky or Aave using ETH or staked ETH. However, due to the flexibility of user-set rates, it is possible that some users will pay significantly lower rates during certain periods.
There are two key parameters to consider:
You have the flexibility to set these parameters as you see fit, allowing you to control the relative riskiness of each Trove. You can create multiple Troves under the same address, enabling you to manage different risk profiles for different portions of your portfolio.
To impede Trove redemption evasion strategies where borrowers try to minimize their interest payments in an unfair manner, a small “premature adjustment fee” is charged on interest rate changes that happen within less than 7 days since the last adjustment (or the opening of the Trove). The premature adjustment fee is equal to 7 days of average interest on the respective borrow market. Note that this fee differs from the user’s set interest rate.
The fee is denominated in USFI and added to the Trove's debt. The same fee is charged when a new Trove is opened or when its debt is increased (only affecting the added debt).
Looping allows you to borrow USFI against your deposited collateral (ETH, wstETH, rETH, STRK, BTC) and use it to buy more collateral, increasing your exposure to the underlying . Stark-Fi comes with built-in automation to achieve this with one click (zappers).
Make sure you choose a frontend that supports this functionality, and be mindful of liquidity/slippage.
Borrowers should set their rates based on their risk tolerance.
Read more about setting your rates (liquity guidelines that works for stark-fi).
Given that 50% of the interest revenue is directly paid out to USFI depositors , we further expect that stablecoin deposit yields should be comparable, if not higher than what competing CDP’s and lending markets offer. Thanks to the attractiveness of USFI and assuming the emergence of external use cases (monetary premium), this could lead to lower borrow rates overall than offered by other platforms. Learn more about the spread between borrowers and lenders in .
Loan-to-value (LTV): This is based on your debt-to-collateral ratio and affects your risk of .
Interest rate (IR): You set this rate yourself, and it influences your risk of being .
