Original | Odaily Planet Daily (@OdailyChina)
Author｜Nan Zhi (@Assassin_Malvo)
Since last year, several centralized exchanges have had disputes over lending products, with the parties claiming that they “suffered huge losses” due to unclear terms. In fact, the lending products of major centralized exchanges are not simply depositing collateral and lending it out, but have many “special” regulations.
To this end, Odaily Planet Daily will summarize and explain the lending rules of Binance, OKX, and Bybit in this article to help readers understand the product details.
Binance Demand Loans
Collateral
Users can only pledge assets that have been subscribed to the principal-guaranteed coin-earning current products as collateral, including 137 currencies including USDT. If the principal-guaranteed coin-earning collateral is not enough to guarantee the required loan amount, users can also use the digital assets in the spot account to subscribe to the principal-guaranteed coin-earning current products and then use them as collateral.
Borrowing Details
Separate positions: There are 218 types of assets that users can borrow. Each "collateral-loan pair" can open a separate loan position. For example, one position is "USDT collateral + ETH loan", and the other position is "USDT collateral + BTC loan". Each "collateral-loan pair" is independent, and its own pledge rate, margin call and forced liquidation pledge rate are calculated separately.
No active liquidation for borrowed coins: Binance current borrowing is an unlimited-term product. As long as this product supports borrowed coins and collateral digital assets, and does not exceed the corresponding pledge ratio, users can hold positions indefinitely.
Collateralization rate: The initial collateralization rate varies depending on the collateralized currency, but is mostly 78% (meaning that a collateral worth $100 can lend a maximum of $78 in assets).
Liquidation Rules
If any currency reaches the maximum forced liquidation rate of 90%, or the outstanding loan value is less than 200 USD, a full forced liquidation will be carried out. All loans will be repaid through the equivalent collateral of the loan position. If a forced liquidation occurs, the platform will charge 2% of the loan amount as a forced liquidation fee.
Borrowing interest
The interest on borrowed coins can be checked on the Binance lending page and is updated every minute. It is worth noting that Binance has not announced the calculation method of borrowing interest for each currency, but in general, the higher the overall pledge rate of a token, the higher the interest. When the loan reaches a certain limit, the depositor will not be able to redeem it, but the interest will also rise to a certain level to encourage the borrower to repay as soon as possible.
(Odaily Note: This clause is also the root cause of the previous CYBER controversy. Binance emphasized in the "Binance Principal Guaranteed Coin Current Product Getting Started Guide" that "If there are too many redemption requests for a certain currency, it may still cause the available balance to be temporarily insufficient. In this case, redemption will return to normal when the borrower repays or other users provide additional liquidity.")
After the loan order is successful, interest will be calculated every minute, and the interest generated every minute will be added to the total outstanding loan amount.
Special Terms
Due to the influence of the EU's crypto asset market supervision law, the European Economic Area (EEA) cannot lend unregulated stablecoins such as USDT, FDUSD, etc. Please see the English version of the lending rules for details.
After the digital assets used to subscribe to the principal-guaranteed coin-earning current products are pledged to Binance current loans, the real-time annualized income and tiered annualized income of the principal-guaranteed coin-earning current products will continue to be obtained, but BNB can no longer enjoy the Launchpool income. As shown in the figure below, the original lending rate of WLD is 24.06%. After deducting the current income of ETH, the loan is made according to the 78% pledge rate, and the net borrowing rate is 22.9%.
(Odaily Note: The net annualized interest rate displayed on the interface is calculated according to the initial pledge rate and will not change with the loan amount. Users who do not borrow the full amount need to calculate the annualized interest rate separately.)
OKX Current Loans
Collateral
There are a total of 149 currencies, including USDT, and the collateral is simply pledged without any other benefits or requirements.
Borrowing Details
Mode selection: There are 127 types of assets that users can borrow, which can be freely combined to establish "multi-collateral-loan pairs". As shown in the figure below, BTC+ORDI+BCH is used as collateral, and the borrower can choose from 127 tokens. When a loan position exists, the collateral can be freely adjusted within the safety line.
Pledge rate: OKX’s initial pledge rate is relatively low, basically 70%.
Liquidation Rules
The calculation method of forced liquidation pledge rate of OKX is = (collateral value × currency discount rate - loan value × maintenance margin rate - forced liquidation fee) / collateral value. The forced liquidation pledge rate is basically 98.5%, but the discount rate of each token varies greatly. The highest is BTC, ETH, USDT, and USDC. The discount rate varies between 0.9-1 depending on the amount. The lowest is a series of altcoins such as NOT, 1INCH, ACE, etc. The discount rate is 0.5 for less than 50,000 US dollars, and the discount rate is 0 for more than 50,000, which means that the borrowing limit is only half of that of BTC and other currencies, and the maximum borrowing amount is 50,000 US dollars.
In addition, it should be noted that after the forced liquidation of the current loan, the remaining funds will enter the platform risk reserve to cover possible losses from liquidation and will not be returned.
Borrowing interest
The interest rate of OKX current loans is refreshed every hour, and interest is deducted every hour. The interest rate mechanism is relatively special, and the market interest rate is generated by matching the interest rate posted by Yubibao users with the loan amount. For example:
User A deposits 1000 USDT and sets the minimum lending rate to 1%. User B deposits 1000 USDT and sets the minimum lending rate to 10%. If a user borrows 1500 USDT on the platform, then user A will be fully matched, and user B's 500 USDT will be lent out at an interest rate of 10%, with no interest on the remaining part. Therefore, there is a possibility of "critical hit" returns on borrowed coins on the OKX platform.
Special Terms
In addition to the healthy ratio of users' own borrowing and lending, OKX also has an automatic currency exchange mechanism for borrowing and lending. When the platform's borrowing and depositing amount reaches 100%, in order to reduce the risk of all borrowing users on the platform as soon as possible, the users will be graded from large to small according to their borrowing amount. The group of users with the highest borrowing amount will be given priority to be automatically exchanged by the system. In short, whether the user's loan will be liquidated is also related to the overall lending rate of the market.
(Odaily Note: The official document is "Automatic Currency Exchange Rules".)
The above rules correspond to OKX's depositors being able to deposit and withdraw at any time, which is completely different from Binance's model of "triggering the upper limit and forcing borrowers to repay through high interest rates". According to the official announcement, this model is not expected to be adjusted in the near future.
Therefore, for borrowers, in addition to the healthy ratio of their own positions, they also need to pay attention to the overall lending rate of the market. However, in order to prevent attackers from maliciously attacking based on this data, the overall lending rate of the market will not be made public. Users will receive risk warnings and liquidation echelons via email.
Bybit pledged currency loan (simple version of loan)
Collateral
There are a total of 153 currencies, including USDT, and the collateral is simply pledged without any other benefits or requirements.
Borrowing Details
Separate positions: There are 157 types of assets that users can borrow, and each "collateral-loan pair" can open a separate loan position, which is basically the same as the model adopted by Binance.
Staking rate: Bybit’s initial staking rate is 80%, and the forced liquidation staking rate is 95% (a few are 93%), which is much higher than other platforms.
Liquidation Rules
The user's collateral assets will be used to automatically repay the full amount, and a 2% liquidation fee will be charged. The liquidation fee will be deducted from the collateral amount, and any remaining collateral after full repayment will be returned to the account that the user previously selected for collateral deduction.
Borrowing interest
There is no fixed repayment date for demand loans, and the interest rate is not fixed. It fluctuates every hour according to market conditions, and interest will be calculated on an hourly basis until the loan is repaid or forced liquidation is triggered.
in conclusion
Most DEXs adopt the method of earning interest on deposited coins. Once the loan reaches the upper limit, it cannot be withdrawn and the interest rate is greatly increased, which encourages borrowers to repay the loan. This method is similar to Binance's solution.
Binance and OKX have introduced more complex lending rules than other exchanges. In the event of an extreme surge in prices and the platform being fully borrowed, Binance's depositors will be unable to withdraw and sell their coins, which is relatively beneficial to borrowers. OKX has greater flexibility and combinability, and is relatively beneficial to depositors.
