# Borrowing

## Access Liquidity Without Selling

Borrow from Everst using your supplied assets as collateral. All loans are over-collateralized with no fixed repayment schedule—repay whenever you want.

## Why Borrow?

### Common Use Cases

**1. Access Liquidity Without Selling** Keep your stock token long positions while accessing cash for expenses or investment opportunities.

**2. Tax Efficiency** In many jurisdictions, borrowing isn't a taxable event, unlike selling.

**3. Hedging Strategies** Borrow stock tokens for portfolio balancing, flexibly adjusting positions based on market changes.

**4. Leverage Trading** Borrow to increase your position size (advanced strategy with higher risks).

**5. Arbitrage Opportunities** Borrow at lower rates to deploy capital in higher-yielding strategies.

## How Borrowing Works

### Process

1. **Supply collateral** to the protocol
2. **Enable assets as collateral** (if not automatic)
3. **Borrow up to your limit** based on collateral factors
4. **Pay interest** continuously on borrowed amount
5. **Repay anytime** to reclaim your collateral

### Key Mechanics

**Over-Collateralization Required**

Your maximum borrowing capacity equals the sum of each collateral's value multiplied by its collateral factor.

**Example**:

If you supply $10,000 worth of AAPL tokens with a 75% collateral factor, you can borrow up to $7,500 worth of any asset. The $2,500 difference serves as a safety buffer protecting against price volatility.

## Current Borrow Rates

*Rates update dynamically based on utilization*

| Asset | Borrow APY | Available Liquidity | Utilization | Borrow Cap   | Risk Level  |
| ----- | ---------- | ------------------- | ----------- | ------------ | ----------- |
| USDT  | 5-15%      | Market-dependent    | 40-80%      | Configurable | Low         |
| AAPL  | 6-18%      | Market-dependent    | 30-70%      | Configurable | Medium      |
| TSLA  | 8-25%      | Market-dependent    | 35-75%      | Configurable | Medium-High |
| NVDA  | 10-30%     | Market-dependent    | 40-80%      | Configurable | Medium-High |
| SPY   | 4-12%      | Market-dependent    | 25-65%      | Configurable | Low-Medium  |

*Note: Rates and liquidity change dynamically based on supply and demand*

## Borrowing Power Calculation

Your borrowing power depends on:

1. Value of supplied assets
2. Collateral factors of those assets
3. Current oracle prices

### Collateral Factors

| Asset Type                          | Collateral Factor | Max LTV | Liquidation Threshold | Recommended Strategy         |
| ----------------------------------- | ----------------- | ------- | --------------------- | ---------------------------- |
| USDT Stablecoin                     | 85%               | 85%     | 88%                   | Conservative base allocation |
| Blue-chip Stock Tokens (AAPL, MSFT) | 75%               | 75%     | 80%                   | Core holdings                |
| Growth Stock Tokens (TSLA, NVDA)    | 70%               | 70%     | 75%                   | Growth allocation            |
| ETF Indices (SPY, QQQ)              | 75%               | 75%     | 80%                   | Diversified investment       |

### Detailed Example

```
Your Supplied Assets:
- $5,000 worth of AAPL = $5,000 (75% collateral factor)
- 10,000 USDT = $10,000 (85% collateral factor)
- $3,000 worth of TSLA = $3,000 (70% collateral factor)

Borrowing Power Calculation:
- AAPL: $5,000 × 0.75 = $3,750
- USDT: $10,000 × 0.85 = $8,500
- TSLA: $3,000 × 0.70 = $2,100

Total Borrowing Power: $14,350
```

## Health Factor Management

Your Health Factor is crucial for avoiding liquidation:

### Calculation

Health Factor equals your total collateral value multiplied by the liquidation threshold, divided by your total borrowed amount.

### Health Factor Zones

| Health Factor | Status      | Recommendation          |
| ------------- | ----------- | ----------------------- |
| > 2.0         | Very Safe   | Comfortable buffer      |
| 1.5 - 2.0     | Safe        | Monitor occasionally    |
| 1.25 - 1.5    | Caution     | Monitor closely         |
| 1.0 - 1.25    | Risk Zone   | Add collateral or repay |
| < 1.0         | Liquidation | Subject to liquidation  |

### Real-World Scenario

**Initial Position** With $10,000 worth of AAPL collateral and 5,000 USDT borrowed, your Health Factor is 1.6 (safe).

**Market Movement** If AAPL drops 30%, your collateral value falls to $7,000 while debt remains 5,000 USDT. Your Health Factor drops to 1.12, entering the risk zone.

**Required Action** To restore safety, you need to either supply additional collateral or repay approximately $1,000 of your loan.

## Interest Rate Dynamics

### How Rates Are Determined

Everst uses a **Jump Rate Model** that adjusts rates based on utilization:

When utilization is below 80%, rates increase gradually. Above 80%, rates jump sharply to ensure liquidity remains available for withdrawals.

**Typical Parameters**:

* Base Rate: 2% APY
* Multiplier: 0.15 (15% slope)
* Kink: 80% utilization
* Jump Multiplier: 1.0 (100% slope after kink)

### Interest Accrual

Interest accrues continuously with each block:

* Compounds continuously
* No payment schedule
* Added to your borrow balance
* Paid when you repay

**Example Interest Calculation**:

Borrowing 10,000 USDT at 7% APY results in approximately $1.92 daily interest, $58 monthly interest, and $700 annual interest.

## Borrowing Strategies

### Conservative Borrowing

* Keep Health Factor > 2.0
* Borrow USDT using stock token collateral
* Use for real-world expenses

**Example**: Supply $20,000 worth of AAPL, borrow 5,000 USDT (Health Factor = 3.2)

### Leveraged Long Position

* Supply stock tokens, borrow USDT, buy more stock tokens
* Amplifies gains and losses
* Requires active management

**Example**:

1. Supply $10,000 worth of TSLA
2. Borrow 7,000 USDT
3. Buy more TSLA with USDT
4. Profit if TSLA gains > borrow rate

### Stock Rotation Strategy

* Supply outperforming stock tokens
* Borrow underperforming stock tokens
* Based on fundamental and technical analysis

**Example**: Supply NVDA (AI boom), borrow traditional bank stocks

### Yield Arbitrage

* Borrow low APY assets
* Deploy in higher yield strategies
* Pocket the difference

**Example**: Borrow USDT at 5%, earn 8% in other DeFi protocols = 3% profit

## Managing Your Loan

### Adding Collateral

* Supply more assets anytime
* Immediately increases borrowing power
* Improves Health Factor

### Partial Repayment

* Repay any amount anytime
* Reduces interest burden
* Frees collateral proportionally

### Full Repayment

* Repay entire loan + interest
* Reclaim all collateral
* Close position completely

### Interest Management

* Interest compounds into principal
* Monitor total debt regularly
* Consider periodic interest payments

## Risk Considerations

### Liquidation Risk

* Monitor collateral prices
* Maintain safe Health Factor
* Understand liquidation penalties (configurable incentive for liquidators)

### Interest Rate Risk

* Rates are variable
* Can increase with demand
* No rate locks available

### Oracle Risk

* Prices from external feeds
* Potential for temporary mispricing
* Multiple oracles for redundancy

### Smart Contract Risk

* Code vulnerabilities possible
* Audited but not risk-free
* Insurance options available

### Stock-Specific Risks

* **Price Volatility**: Stock token price volatility may trigger liquidation
* **Market Hours**: Follows US stock trading hours, affecting liquidity
* **Company Events**: Earnings, news, mergers affect prices
* **Regulatory Risk**: Impact of stock-related regulatory changes

## Best Practices

### For New Borrowers

1. Start with small amounts
2. Keep Health Factor > 2.0
3. Borrow USDT first
4. Set price alerts
5. Have repayment plan

### Risk Management

* Never borrow maximum amount
* Diversify collateral types
* Monitor market conditions
* Keep emergency funds ready
* Use stop-loss strategies

### Monitoring Tools

* In-app dashboard
* Price alert settings
* API for programmatic access
* Third-party monitoring services

## Advanced Strategies

### Stock Event Trading

* **Pre-Earnings**: Position in expected strong performers
* **Pre-Dividend**: Borrow stock tokens to capture dividend rights
* **Restructuring/M\&A**: Adjust positions based on corporate actions

### Cross-Market Arbitrage

* **Time Zone Arbitrage**: Exploit price differences across markets
* **Volatility Arbitrage**: Interest rate differences during high volatility periods
* **Liquidity Mining**: Borrow then participate in other protocols

### Risk-Hedged Portfolios

* **Beta Hedging**: Borrow high-beta stocks to hedge market risk
* **Sector Hedging**: Long/short pairs within same industry
* **Macro Hedging**: Position adjustments based on economic cycles

## Practical Calculators

### Borrowing Cost Calculation

```
Borrow Amount: 10,000 USDT
Borrow Rate: 8% APY
Term: 6 months

Calculation:
Daily Interest: 10,000 × 8% ÷ 365 = 2.19 USDT
Monthly Interest: 2.19 × 30 = 65.7 USDT
6-Month Interest: 65.7 × 6 = 394.2 USDT
```

### Health Factor Calculation

```
Collateral: $15,000 worth of AAPL (80% liquidation threshold)
Borrowed: 10,000 USDT

Health Factor = (15,000 × 0.8) ÷ 10,000 = 1.2
```

## Gas Costs

* Borrow: \~$0.20-0.30
* Repay: \~$0.15-0.25
* Add collateral: \~$0.15-0.25

*Gas costs vary by network, BSC typically lowest*

## Next Steps

* **Ready to borrow?** See [How to Borrow](https://block-street.gitbook.io/docs/user-guides/borrowing/how-to-borrow)
* **Manage collateral** Review collateral factors section above
* **Avoid liquidation** Monitor your Health Factor
* **Understand risks** Review [Risk Management](https://block-street.gitbook.io/docs/risk-and-safety/risk-and-safety)

***

*All loans are subject to liquidation if under-collateralized. Borrow responsibly and monitor your positions.*