Market Collateral Factors

An up to date list of the assets available to be supplied and borrowed on PaperDAO, along with their collateral status and factors (LTV ratios).

Accepted Collateral

Updated 25/10/2022

Name	Symbol	Collateral	Collateral Factor	Liquidation Bonus*	Reserve Factor
STABLECOINS
USW	USW	Yes	50%	8%	10%
USDC	USDC	Yes	80%	8%	10%
USDT	USDT	Yes	80%	8%	10%
TOKENS
PaperDAO	PPR	Yes	10%	8%	NA
EthereumPoW	ETHW	Yes	50%	8%	10%
UniWswap	UNIW	Yes	20%	8%	NA

Collateral Factor

The Collateral Factor, also known as the Loan to Value (LTV) ratio defines the maximum amount of currency that can be borrowed with a specific collateral. It’s expressed in percentage: at CF=75%, for every 1 ETHW worth of collateral, borrowers will be able to borrow 0.75 ETHW worth of the corresponding currency. Once a borrow is taken, the CF evolves with market conditions.

Liquidation Bonuses

Liquidators receive a bonus on the price of the assets of the collateral when the loan has passed the liquidation threshold.

• The protocol takes a 2.8% fee from liquidations out of the liquidation bonus which goes towards protocol revenues.

Borrow Limit

Your collateral is at risk of liquidation when your borrow limit reaches 100%. We recommend keeping a healthy borrow limit of ~50% to reduce your risk of liquidation.

Reserve Factor

The reserve factor allocates a share of the protocol's interests to a collector contract as reserve for the ecosystem. For instance, a 10% reserve factor means the protocol receives 10% of the borrowers APY as fees when they make a repayment. For example: a $100K borrow of USW for a year, at 10% borrow APY, would result in $10,000 * 0.1 = $1,000 reserve fees for the protocol upon repayment.

Risk Parameters

Market risks have the most direct impact on the risk parameters:

Liquidity

The liquidity is based on the volume on the markets, which is key for the liquidation process. This can be mitigated through the liquidation parameters: the lower the liquidity, the higher the incentives.

Volatility

The volatility of price can negatively affect the collateral which safeguards the solvency of the protocol and must cover the liabilities. The risk of the collateral falling below the borrowed amounts can be mitigated through the level of coverage required, the Collateral Factor. It also affects the liquidation process as the margin for liquidators needs to allow for profit.

Market Capitalisation

The market capitalisation represents the size of the market, which is important when it comes to liquidating collateral. This can be mitigated through the liquidation parameters: the smaller the market cap, the higher the incentives.

Overall Risk

We mitigate overall protocol risk by only allowing the native gas token (ETHW) and major stablecoins to have collateral factors.

Price Feed

There is currently no Oracle, nor meaningful on-chain liquidity for ETHW to create a TWAP based price feed. Hence the price will be updated manually initially. Mistakes can happen while doing this.