🪙Leverage
Leverage right out of the box!
Baseline has designed a decentralized lending facility that allows $CHAMP holders to borrow assets by using their $CHAMP as collateral. Since $CHAMP have an intrinsic value for each token, the protocol allows holders to borrow this value at a high loan-to-backing (LTB) value, for a small fee and no risk of liquidation.
There are several unique features of this credit facility that differentiates itself from other lending protocols:
Peer-to-Lender (P2L): users borrow directly from the protocol using protocol-owned reserves. The borrower does not have to rely on external third-party lenders who may pull liquidity during market stress.
Isolated Risk Architecture: unlike other lending markets that socialize borrower risk through shared pool architecture, each loan is segregated.
No Interest Rates: loans are not charged interest, they are charged a one-time origination fee at the time the loan is extended.
No Liquidations: since every $CHAMP is backed by reserves at the floor price value, the protocol doesn't need to manage a liquidation engine, meaning the protocol doesn't "seize" the borrower's assets. In the event of a default (due to expiry), the protocol simply burns the collateral, reducing the circulating supply and reserves at a ratio that grows the intrinsic value.
Fixed Duration: instead of price-based liquidations, loans have a fixed duration.
No Oracles: as there are no liquidations, the credit facility doesn't require any oracles to function, making it simpler and more reliable.
Loan Terms and Conditions
Loans are underwritten in $USDT against $CHAMP token collateral.
Loan duration is denoted in days, can be extended in any number of days and expire at the beginning of the next full day.
There is a one-time origination fee of 0.01095% upon underwriting.
Loans can be extended for the same 0.01095% fee.
The Loan-to-Backing (LTB) ratio is 100%
A user can only have one loan at a time.
Interactions
Opening Loan: to use the credit facility, the user deposits $CHAMP into Lending.sol, and receives reserves in return. The origination fee is netted from the received reserves. The user cannot open a new loan if they have an existing loan outstanding.
Repaying Loan: a user can repay loan any time by depositing reserves into Lending.sol, and receives the proportional share of collateral in return. Partial loan repayments are permitted.
Rolling Loan: a user can roll a loan if it's not expired by interacting with Lending.sol. If the floor price has gone up since last borrow, rolling a loan will allow you to take the net reserves out, with fee taken on those reserves.
Defaulting on Loans: when loans exceed their duration, the protocol automatically defaults all expired loans at end of day. Upon default, the protocol's reserves shrink (as they are not returned), the protocol burns the collateral. Given the burned collateral exceeds the reserves borrowed, the protocol realizes a profit.
Use Cases
While there are many ways to use the credit facility, we see three primary use cases:
Borrow and buy $CHAMP to create a highly capital efficient leveraged position.
Borrow and stake reserve into yielding facility (e.g. borrow ETH and stake into stETH).
Borrow and LP in Baseline pool, creating a fee generating liquidity position.
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