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Borrowing

## Why use OINDAO to borrow?

OINDAO provides a standardized stablecoin issuance solution for multiple public blockchain networks. This is especially useful for projects where stablecoins are not yet easily accessible. Imagine a scenario when long-term holders of AVAX need liquidity. Instead of selling AVAX to the market, the holders can use the OINDAO protocol to lock up AVAX as collateral and borrow aUSD. The borrowers can then repay the loan at a future date. This process allows the holders to gain liquidity while still maintaining their exposures to the long-term growth of AVAX.
Furthermore, OINDAO also enables borrowers to take leveraged positions on assets they hold bullish views on. To illustrate this process using AVAX as an example again, holders can first borrow against AVAX as collateral on OINDAO to withdraw aUSD, which can then be used to purchase additional AVAX. This process can be repeated several times until the users reach the Minimum Collateralization Ratio, subsequently leveraging the holders' AVAX positions to multiple times. Kindly note that leverage is a risky process and is only one of the many use cases of OINDAO. Users should take leveraged positions with high levels of cautions to avoid potential financial losses.

## Collateralization Ratio (C-Ratio)

A collateral is an asset a user must lock up to borrow the required amount of stablecoin. OINDAO accepts the native tokens of its partnered public blockchain projects (Constellation Partners) as collateral.
A C-Ratio is the numerical relationship between the Dollar value of the user's collateralized assets and the associated value of the borrowed stablecoins.
For example, imagine a scenario where the price of AVAX is currently $50. Alice, an AVAX holder, decides to deposit 1,000 AVAX as collateral to borrow 10,000 aUSD. As a result, the C-Ratio of of Alice's position 500%, calculated as follows: ## Minimum Collateralization Ratio (MCR) The Minimum Collateralization Ratio (MCR) is the lowest C-Ratio a user must maintain in order to prevent a Liquidation Event from being triggered. The OINDAO system supports the setting of multiple MCRs, varied according to the volatility of our Constellation Partners' native tokens. The MCR parameter will usually be set to 180% at default - this means that to borrow $10,000 in stablecoins, a user must need to stake collateral with at least $18,000 in Dollar value to prevent liquidation. The MCR will be adjusted subsequently based on the decisions of community-driven DAO, though will always be kept above 100% to ensure that loans are fully backed by collateral assets. It is also strongly recommended that users always maintain a comfortable level of safety cushion above the MCR to avoid accidental Liquidation in case of unexpected volatile price movements in their underlying collateral assets. ## The Liquidation Reserve Every time a user opens a Vault to borrow, a small proportion of the borrowed loans will be locked aside as Liquidation Reserve to compensate Liquidators' gas fees in case of potential Liquidation Events (see Liquidation). Note that the Liquidation Reserve deposit is one-time only, and will be deducted directly from the users' borrowed loans, and will not be required deposit additional stablecoin for Liquidation Reserve for subsequent borrowings in the same Vault. The OINDAO system's default required value for the Liquidation Reserve is set at $20, which will be deducted directly from the borrowed loans. As different partnering blockchains have varied levels of gas fees, the actual Liquidation Reserve requirement will differ by partnering blockchains. Subsequent settings of the Liquidation Reserve can be voted by the OINDAO community.
The Liquidation Reserve can be fully refunded to the users if they make full repayments to close their Vaults without triggering a Liquidation Event. It is also regarded as debt, and will be contributing towards the user's total debt burden value when calculating the C-Ratio.
To illustrate the above process using an example, Alice decides to borrow 1,000 aUSD against \$2,000 worth of AVAX using OINDAO. Because it is her first time setting up the Vault, she will have to set aside 20 aUSD as Liquidation Reserve. As a result, the total value of her disposable loans is 980 aUSD, and her C-Ratio remains at 200%. The 20 aUSD will be fully refunded when she makes full repayments when closing the Vault. However, should her position becomes liquidated, she will lose the 20 aUSD to compensate for the Liquidator's gas cost.

## Stability fees

Users that borrow stablecoins will be required to pay a dynamic stability fee, equivalent to a variable interest payment in the fiat world. The stability fee is incurred via a simple interest method, and is accrued per block time.
While OINDAO does not implement a repayment schedule, and users can choose to make repayment at any time, the accumulated interest fees will be added and updated per block time to the total value of the loans, affecting the user's C-Ratio.
Stability rates will be adjusted by a community decision of the OINDAO.