Platform
Aada.finance protocol V1
RISK MANAGEMENT
🦿
Use cases of platform
Lending perspective. Why you should lend your assets?
Passive income - By lending your assets to users, you can earn interest that is paid by the borrower and is backed by collateral in the event that the borrower fails to repay the loan.
Borrowing perspective. Why you should borrow?
Leverage - The use of borrowed capital to trade cryptocurrencies or other financial assets is referred to as leverage. It increases your purchasing or selling power, allowing you to trade with more capital than you presently have in your wallet
For example:
You create 3 loans request where you will use ADA as collateral and will borrow stable coin such as Djed Usd and you’re expecting that ADA price will rise.
ADA price 0.50$
Loan 1#. Collateral 100k ADA. Loan 40k Djed USD
With Djed USD you buy more ADA, 40k Djed—- 80k ADA (current market price)
Loan 2#. Collateral 80k ADA. Loan 30k Djed USD
You buy more ADA
Loan 3#. Collateral 60k ADA. Loan 20k Djed USD
As you expected ADA price rised to 0.60$
It’s time to harvest.
Loan 3#. You return loan of 20k Djed, receive 60k ADA which you sell for 36k Djed.
Loan 2#. You return a loan of 30k Djed, receive 80k ADA which you sell for 48k Djed
Loan 1#. You return a loan of 40k Djed, receive your initial collateral of 100k ADA
Overall you got back your your initial investment of 100k ADA + 14k Djed USD
Shorting - To enter a short position, borrow cryptocurrency and sell it on an exchange at the present price. Then, at a later period, you must purchase the cryptocurrency and return the capital you borrowed, if the price went down you will exit with a profit.
For example:
- We’re going to short 10k ADA. The current market price of each ADA is 0.50$ leading to a total of 5000$.
- To execute this trade, we will have to borrow 10k ADA from Aada.finance Dapp at the current market price and sell it on exchange.
- Now the market moves as we have expected, and the price of single Cardano falls to 0.30$
- So we buy at this market price and repay the loan.
- Math is simple, the previous market price was 5000$, the current market price is 3000$ = 2000$. This is what you are going to book as profit.
Safe buy - You can borrow it if you wish to obtain some ADA in a secure manner. If the price of ADA falls, you'll just have to pay back the loan; if it rises, it's up to you what to do with the assets.
Hedge - The golden rule for users who are hedging their positions is to take a position that is the opposite of their current one. This means that traders should take a short position if they believe the price of a specific asset will decline and a long position if they believe the price will rise. Cryptocurrency hedging is not completely risk-free, either. Even if the price chart displays pertinent signs, there is no certainty that the price of a specific item will decrease or increase. Therefore, while choosing which cryptocurrency to hedge and what hedging method to employ, traders should consider the advantages and disadvantages.
Yield farming - Specific tokens that may be farmed on the DEX platform with a high APY are available for users to borrow, earning them significant interest rates.
Non-taxable Liquidity - By obtaining a dollar-pegged loan with crypto as collateral Everyone can fund their costs this way without losing investment exposure or triggering taxable events.
Last modified 5d ago
Copy link