Introducing Oolong Lending — Your Entrance to Different DeFi Investment Strategies
Hellooooo Oolongans! Here comes an announcement that has been anticipated by many: Oolong Lending is going live!!!🎉🎉🎉
What is Oolong Lending and why does it matter?
Oolong Lending is a decentralized lending protocol built on OolongSwap with our partner Ola Finance. Here, users can lend and borrow whitelisted assets, allowing users to utilize different DeFi investment strategies!
Some of the usages and benefits of Oolong Lending are:
- Lend tokens in your wallet out to earn reward tokens and interests paid by borrowers with no IL loss
- Use your current tokens as collateral to borrow other tokens, give you access to new assets without selling the current ones
- Leverage a long position on a token
- Enter a short position on a token
- Borrow a token for a lucrative liquidity mining opportunity, while limiting exposure to the token
Not to mention that this is one more important utility added to OLO tokens!
Now let’s dive into the specific details of how Oolong Lending works:
Lending is the process of depositing (i.e. supplying) tokens to a pool. In exchange for providing liquidity to this pool, users receive interest on the tokens they have deposited, and in addition to that, we will also be adding in WAGMIv1 tokens this round as extra incentive for users to provide liquidity! The interest that lenders receive comes from other users who are paying interest to borrow tokens.
Lenders are able to withdraw their tokens at any time (as long as they aren’t being used as collateral to borrow tokens and not all the tokens are being borrowed). There is no time lock or withdrawal penalty.
Borrowing is the act of taking a loan from any of the lending networks. Like majority of the DeFi lending, Oolong Lending relies on a mechanism known as over-collateralized lending — an over-collateralized loan means that in order to take a loan (borrow), one must deposit tokens of higher value. Not only that, but the borrowers must make sure they maintain a proper amount of collateral for the entire lifespan of the loan. In short, users must supply tokens before they can borrow.
After depositing the tokens and enabling them as collateral, users can borrow any of the available tokens from Oolong Lending based on the amount that they supplied and the Collateral Factor of the supplied token(s). Users can even borrow the same token you deposited as collateral!
Liquidators serve an important role in keeping a lending network healthy and preventing the creation of bad debt. They ensure that there are always enough funds in a lending network to support the open positions. Having said that, users should be wary of getting liquidated and take necessary precautions to prevent it.
What does it mean “to get liquidated”?
Liquidation is the process of repaying a borrower’s debt on their behalf, in exchange for a portion of their collateral. In a healthy lending network, liquidators are incentivized to constantly look for loans eligible for liquidation.
Here are two situations that can trigger a liquidation:
- The value of the collateral token falls
- The value of the borrowed token increases
And here are some tips to avoid getting liquidated:
1. Don’t Borrow the Maximum Amount: There is usually a buffer between the Collateral Factor and the Liquidation Factor, but you can offer yourself more of a buffer by not borrowing the maximum amount.
2. Use a Stablecoin to Lend/Borrow: As we learned, positions can change due to price movements in both the supplied asset and the borrowed asset. By using a stablecoin for one side, you reduce the number of variables you have to monitor.
3. Monitor Your Position: After initiating a position, make sure to check on it frequently to ensure it remains in good health.
4. Have a Repayment Plan: The longer you have a loan out, the more chance there is for liquidation. Although loans through the lending network have no required repayment date, it’s smart to have a plan to repay your loan before taking it.
Lending and borrowing is a useful tool that not only add utilities to our native token, but also opens up the door of advanced DeFi investment strategies for our users. It does, however, come with risks if not properly understood. So we strongly encourage everyone to migrate to our Docs and read the full article of lending and borrowing and step by step details in the “Lending” section in our Docs!!!
March 2nd, 2022 3pm UTC! LFG!!!
PS: The interest APY will start right away when Oolong Lending goes online, the WAGMIv1 incentive tokens will come in a few days later!
PPS: Right now there’s a CAP on the total number of OLO that can be used as collateral, that’s 100K and this number will raise as the liquidity of OLO deepens (liquidation higher than 100K can not be performed).
OolongSwap is the biggest DEX on Boba Network, a layer-2 Ethereum scaling solution. As Boba’s first native AMM, it is Oolong’s mission to create the best exchange, best user experience, and deepest liquidity on Boba as our motto is “more to earn, less to spend”. Aside from the regular DEX features, we have also introduced features such as dynamic pair fees to offer users lower trading slippage, multea farm for users to earn double the rewards with the same investment capital and PCV and bonding to offer a sustainable future for Oolong. Our vision is to become the gateway between Boba and the rest of DeFi world, expanding the Boba ecosystem and help new and experienced DeFi users alike find their crypto home.