Detailed borrowing process

How to use the Banx protocol as a borrower

1. The borrower takes the loan

• Interest starts accruing linearly, every second

2. The borrower repays the loan in full

• The borrower repays: the principal, accrued linear interest and the protocol fee

• The borrower recovers full control of their collateral

3. The lender sends a refinancing call

• A lender can send a refinancing call to an active loan, at any given time. Reasons why may include:

  • The loan being unhealthy or displaying downward trending health

  • The loan being healthy, and the lender decides to claim the liquidity owed

  • The lender wants to exit this market

• What happens next will be determined by the offers in the order book:

4. The order book can auto-refinance the loan

• A healthy loan is more than likely to match an existing offer in the order book

• If so, the loan will be auto-refinanced

• The lender will recover the principal + interest and exit

• The new lender will enter the loan from scratch

• Nothing changes for the borrower, the loan keeps accruing linear interest every second

5. The order book cannot auto-refinance the loan

• If the order book contains no better or matching offers, the loan is sent to the refinancing auction

6. The 72 hour refinancing auction starts

• The loan will be offered to new lenders on the same terms

• During this time the collateral cannot be liquidated

• The borrower is able to repay if they want to

7. New lender refinances via the auction

• Refinancing involves covering the principal of the previous loan and accrued interest, allowing the previous lender to exit in full

• The borrower continues to borrow, and can still repay anytime

8. The refinancing auction ends

• The auction ends after 72 hours if no new lender has stepped in to refinance the loan, and if the borrower still hasn't repaid

• If this is the case, the lender receives the collateral and the borrower loses it