1) Perpetual Loans

Borrowers can borrow SOL from the isolated lending pools and will pay a dynamic interest rate

How do Perpetual loans work?

TL;DR available on Twitter : Perpetual loans (previously "Long-term" loans)

Dynamic borrowing rate

Borrowing rate for each collection is dynamic and is based on the amount of liquidity available in the associated isolated lending pool : High liquidity and low utilization rate = Low borrowing interest rate

Low liquidity and high utilization rate = High borrowing interest rate

Upfront fee at loan creation

For each Perpetual loan the protocol charges a 1% (of the loan value) upfront fee, that is independent from interest

LTV and Liquidation price

For each Perpetual loan, the borrower can define the amount of SOL he is willing to borrow compared to the value of its collateral. This ratio is called the "Loan to Value" (LTV). The chosen LTV will define the liquidation price of the loan : High LTV = high amount borrowed compared to the collateral value = high liquidation price

Low LTV = low amount borrowed compared to the collateral value = low liquidation price

Over-collateralization and loan's health

The principle of over-collateralization is that every debt is secured by a collateral, which value significantly exceeds the value of the debt

The ratio between the amount of debt and the amount of collateral is an indicator of "health" (the loan's health). It is the borrower's responsibility and interest to keep track of it

The amount of debt changes over time (interest will come), and the amount of collateral can also change because NFT collections and their items can both rise and fall in value, and the price oracles track these changes

For Perpetual loans, there is no time limit for the loan to be active, but in order to maintain the loan "healthy" the borrower may need to repay it partly from time to time

If at any point the "loan's health" goes into the margin of safety, the borrower will be notified, but if he takes no action and the loan's health reaches 0%, it will enter the 12h Grace Period which is the last chance for the borrower to repay its debt. In the event of repayment default FRAKT will then have to liquidate the collateral

Liquidations for Perpetual loans

Key definitions

• Loan's Health = (1-(liquidationPrice/valuation))*100%

• Liquidation Price = total debt + total debt * margin of safety with total debt = amount borrowed + accumulated fees)

• Margin of safety (by default) = 30%

Notifications

We encourage borrowers to connect their discord account on our app in order to receive important notifications regarding the status of their loans :

• Loan creation notifications

• Margin call notifications

• Grace period notifications

Liquidations for Perpetual loans

Every loan is considered separately so you could be liquidated for a specific loan even if you have SOL or other collaterals available in your wallet

Loan's Health is calculated by an algorithm using debt, current FP and collection volume. If the health of the loan reaches 0% then the loan enters the 12H Grace period, which is the last chance for the borrower to repay its debt (loan value + the interest + a 10% penalty). In the event of non repayment of the debt during the Grace period the collateral NFT will be transferred from the borrower's wallet to be liquidated in a raffle