Borrowing
Borrowing
Borrowing is a fundamental feature of Sendit, allowing users to unlock liquidity by leveraging their deposited assets as collateral. Borrowers can access funds without selling their holdings, making it a powerful tool for liquidity management, margin trading, and other DeFi activities.
A loan essentially means to borrow assets from other people secured by over-collateralization. In that case the borrower has to post more assets as collateral than what they borrow (denominated in USD).
Every market on Sendit features the same technical specs.
Use Cases
Crypto Loans
Accessing Liquidity Without Selling Your Assets
If you hold a sizable position in a particular token and wish to maintain that exposure while gaining access to liquidity for other opportunities, you can utilize Sendit's lending & borrowing functionality to issue a loan. By using your existing token position as collateral, you can borrow SOL and use the proceeds to acquire another asset—without needing to liquidate your original holdings.
This approach is particularly well-suited for short-term trades, or high conviction trades as it allows for portfolio diversification or tactical positioning without triggering a sale of your collateral asset.
Leveraged Loops to Amplify Token Exposure
If you hold a position in a token you are particularly bullish on, you can use that position as collateral to borrow SOL through Sendit. The borrowed SOL can then be used to purchase additional units of the same token, thereby increasing your exposure.
These newly acquired tokens can subsequently be added to your existing collateral, improving your Loan-to-Value (LTV) ratio and enabling you to borrow additional SOL. This process can be repeated multiple times, effectively creating a leveraged loop that amplifies your position in the token.
While this strategy can significantly enhance potential upside, it also increases risk and should be approached with caution and appropriate risk management.
Secondary Liquidity Venue
Large token holders—such as whales, project teams, or early investors—often face challenges when attempting to liquidate sizable positions without incurring substantial price impact. As an alternative to direct selling, these holders can issue a collateralized loan, allowing them to borrow significant amounts of capital without any slippage.
This approach offers a form of off-ramping that avoids triggering a visible sell order. In scenarios where the value of the collateral declines and the loan is subsequently liquidated, the original token holder does not actively sell their position, which can be more favorable from a reputational or market optics standpoint.
In this context, a high Loan-to-Value (LTV) loan—structured with the understanding that liquidation may occur or may be intended—can effectively function as a stop-loss mechanism, enabling strategic risk management without immediate market impact.
Margin Trading
Liquidity serves as the foundational layer of any money market, enabling stability, larger loan volume and the development of advanced financial features. The greater the liquidity, the more robust and flexible the system becomes for building additional functionality.
In the case of Sendit, margin trading is seamlessly integrated into the existing money-market infrastructure. It leverages the SOL liquidity within each market to facilitate leveraged long positions on the respective collateral token. This architecture allows users to trade any token listed on Sendit with up to 3x leverage, all through a professional-grade, intuitive, and user-friendly interface.
How Borrowing Works
Deposit Collateral: Before borrowing, users must deposit supported tokens into the protocol. These deposits act as collateral and determine the borrowing limit. Each collateral asset has specific parameters, such as:
Loan-to-Value (LTV) Ratio: The maximum percentage of the collateral’s value that can be borrowed.
Liquidation Threshold: The point at which the collateral becomes eligible for liquidation if the Health Factor drops below 1.0.
Borrow Assets: Users can borrow up to the maximum amount allowed based on their collateral’s value and the market’s LTV ratio. Borrowed assets accrue interest at a Borrow APR, which is determined dynamically by the market's utilization ratio.
Repay Borrowed Amount: Borrowers can repay their loans at any time. Once the borrowed amount is fully repaid (including accrued interest), the locked collateral can be withdrawn.
Manage Health Factor: The Health Factor represents how safe a borrower’s position is. Borrowers must monitor their Health Factor to avoid liquidation during market volatility.
Key Parameters for Borrowing
Loan-to-Value (LTV) Ratio:
Defines the maximum borrowable amount as a percentage of the collateral’s value.
Sendit allows to issue loans up to 70% LTV ratio.
For example, with an LTV of 60%, depositing $1,000 worth of collateral allows you to borrow up to $600.
Liquidation Threshold:
Represents the collateral-to-debt ratio at which your loan becomes eligible for liquidation.
Sendit's liquidation threshold is 75%.
Borrow APR:
The interest rate charged on borrowed funds.
Determined dynamically using the Interest Rate Curve based on the pool’s Utilization Ratio.
Minimum APR is at 0% utilization is 15%.
Optimal APR is at 70% utilization is 70%.
Maximum APR is at 100% utilization is 400%.
Position Size Limit:
The maximum borrow amount per address
Determined dynamically considering the borrow amount and the respective price impact if the loan was liquidated.
Position Size Limit = Max. 20% price impact at liquidation
A security measure designed to mitigate repayment risk, reduce reliance on a single borrower, and enhance the efficiency of liquidation.
Loan-to-Value Ratio
The Loan-to-Value ratio (LTV) is a critical metric in borrowing. It shows your loan size relative to your maximum borrow amount and indicates how close a borrower is to liquidation. A lower LTV ratio indicates a safer position, while a LTV ratio below of 75% may trigger liquidation.
Formula for LTV ratio:
LTV ratio = Borrowed Value / Collateral ValueBorrowed Value: The total debt, including accrued interest.
Collateral Value: The value of your posted vollateral.
Liquidation
If the LTV ratio goes to 75%, the borrower’s position becomes eligible for liquidation. During liquidation:
A portion of the collateral is sold to repay the debt.
A Liquidation Penalty is applied, reducing the value of the liquidated collateral.
For more details, refer to the Liquidation section.
LTV Ratio Ranges
Safe Zone < 50%: The position is safe. Borrowers should monitor their position regularly.
Caution Zone 50 < 67%: The position is risky. Borrowers should monitor their position closely or post additional collateral/repay part of their loan.
High Risk Zone 67 < 75%: The position is very risky. Borrowers should immediately post additional collateral or repay part of their loan in order to avoid liquidation.
Liquidated > 75%: The position becomes eligible for liquidation. A portion of the collateral will be sold to repay the debt.
Example of LTV Calculation
Initial Position:
Collateral: $10,000 worth of FARTCOIN
Liquidation Threshold: 75%
Borrowed Amount: $5,000 in SOL
LTV Ratio:
LTV Ratio = $5,000 / $1,000 = 0.5 = 50%Market Drop: If FARTCOIN's price drops (assuming the borrowed amount remains the same), reducing the collateral value to $6,500:
Health Factor = $5,000 / $6,500 = 0.769 = 76.9%The Health Factor is now above 75%, and the position is eligible for liquidation.
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