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Collaterized Loan Position​

       

Collateralized Loan Positions are a foundational concept within Chiss Protocol that enables users to borrow against their crypto assets. Users can deposit USD-backed stablecoins, such as USDT, as collateral to open a loan position, which allows them to borrow localized stablecoins like chNaira or chLira. This mechanism provides users with access to liquidity while keeping their existing crypto assets intact, essentially unlocking value without needing to sell their holdings.

  • Overcollateralization: To mitigate risk, all loans on Chiss Protocol are overcollateralized. This means that users must provide collateral greater in value than the amount they wish to borrow. The collateralization ratio ensures that the protocol remains solvent even in the face of price volatility. For example, if a user wishes to borrow $1,000 worth of chNaira, they may need to provide $1,500 worth of USDT as collateral, depending on the collateralization requirements set by the protocol.

  • Collateral Management: The Loan Manager component of Chiss Protocol is responsible for managing collateralized loan positions. It monitors the value of collateral in real-time using price feeds provided by ChainLink and IMO. If the value of the collateral falls below a certain threshold, the Loan Manager will trigger a liquidation to protect the protocol's solvency.

  • Liquidation Mechanism: If a user's collateral value falls below the required collateralization ratio due to market volatility, the loan position is subject to liquidation. In this process, the collateral is used to repay the outstanding debt, and any remaining collateral is returned to the user. Liquidations are essential to maintaining the health of the protocol and protecting the interests of other users.

  • Borrowing and Redemption: Once a loan position is opened, users can use the borrowed stablecoins within the Chiss ecosystem or redeem them for fiat through Facilitators. This flexibility allows users to leverage their crypto assets for real-world use cases, such as paying bills or funding business operations, without having to sell their original holdings.

Collateralized Loan Positions provide a powerful tool for users to access liquidity while retaining ownership of their crypto assets. By utilizing a robust collateralization and liquidation framework, Chiss Protocol ensures that both borrowers and the protocol remain protected against market risks.