Borrowing From The Lending Pool

The Five Protocol lending pool allows you to borrow assets against your deposited collateral. This guide explains how to borrow from the protocol's lending pool.

Borrowing Process

1. Navigate to the "Borrow" card of the Five Protocol app

2. Ensure you have deposited collateral (if not, you'll need to deposit first)

3. Select the asset you wish to borrow

4. Enter the amount you wish to borrow

5. Confirm the transaction in your wallet

Collateral Requirements

Before borrowing, you must deposit collateral. Each collateral asset has specific parameters:

• Loan-to-Value (LTV) Ratio: Maximum amount you can borrow relative to your collateral value

• Liquidation Threshold: When your position becomes eligible for liquidation

• Liquidation Bonus: Premium paid to liquidators if your position is liquidated

Managing Loan Health

After borrowing, it's crucial to monitor your loan's health factor:

• Health Factor > 1: Your position is safe

• Health Factor < 1: Your position can be liquidated

Factors that affect your health factor:

• Collateral value fluctuations

• Borrow amount

• Accrued interest

• Liquidation thresholds of your collateral assets

Borrowing APR

The borrowing Annual Percentage Rate (APR) is determined by:

• The current utilization rate of the asset in the protocol

• The base rate and slope parameters set for the asset

• Market supply and demand dynamics

The formula used for calculating the borrow rate is:

If utilization <= optimal_utilization:
  borrow_rate = base_rate + (utilization * slope_rate / optimal_utilization)
Else:
  borrow_rate = base_rate + slope_rate + ((utilization - optimal_utilization) * slope_excess / (10000 - optimal_utilization))

Repayment

To repay your loan:

1. Select the VertIcons on the position card and click the "Repay" option.

2. Confirm the transaction