📑Money Market: Supply & Borrow
How do I supply?
Navigate to the "Markets" page and select the asset you intend to provide. As Synonym is a cross chain money market, you are able to select the chain you will be providing the asset from. If the selected chain in your wallet is different, you will have to click "Switch Chain". Select "Supply" for the asset you intend to provide. Enter the quantity you wish to provide and confirm your transaction. After the transaction is verified by Wormhole Relayers, your provision is officially recorded, and you will start accruing interest.
Why do transactions take a long time?
Messages must successfully move between the hub and spokes during a transaction. We are not using optimistic finality assumptions as that can be far too risky for our standards. Instead, we are waiting for full transaction finally across chains to ensure the highest security guarantees.
Non-hub (OP/ETH) Withdraws and Borrows -> Up to 40 minutes
Spoke chains needs to send a message to the hub indicating the above actions and send a response back releasing the tokens (so this requires double the time).
We are working on initiating these actions on the hub to avoid the second leg (2nd message) and cut the time in half.
Non-hub (OP/ETH) Supplies and Repays -> Up to 20 minutes
A message needs to be sent from the Spoke to the Hub for accounting, which takes 20 minutes
Reason why this is taking a long time:
We are not using optimistic finality assumptions, and waiting for full transaction finally for the highest security guarantees.
With future improvements the state roll-back risk could be absorbed by marketmakers via finality risk offloading -> we are currently working on this!
We've ultimately made the decision to opt for security and flexibility over raw speed. We believe that sacrificing the security of user funds for speed improvements is not the right decision.
How much will I earn?
Every asset has unique variable Annual Percentage Yield (APY) based on supply and demand. Interest payments are shared among suppliers, calculated as the average borrow rate multiplied by the utilization rate. The yield for suppliers increases with higher utilization of a reserve. You can explore the interest rate variability by clicking "Details" under an asset of your interest on the "Markets" page.
Is there a minimum or maximum amount to supply?
There is no minimum cap. However, for very small amounts, the transaction gas cost might exceed the anticipated earnings, especially on Ethereum Mainnet. This should be considered when supplying minimal amounts.
There is a max cap per asset per chain, other than USDC that has a Global Max Cap Setting. It is highly unlikely that one user is able to reach the supply cap. Nevertheless, users can view them by clicking "Details" on "Markets" page.
Can I choose assets to be used as collateral?
At Synonym V1, there is currently no opportunity to select assets that will be / will not be used as collateral. All assets supplied from the wallet will be used as collateral.
What is the point of borrowing if I can just sell?
Selling assets means you exit your position in that asset, losing out on potential future value increases if you're bullish on it. Borrowing lets you get liquidity (working capital) without liquidating your assets. Users typically borrow for sudden expenses, to leverage their holdings, or to seize new opportunities.
How do I borrow?
If you have supplied an asset, then, go to the "Portfolio" page and click “Borrow” for the desired asset under Assets to Borrow. Due to cross chain functionality, you are able to borrow an asset of your choice via any of the supported chains. Decide the amount you need, backed by your supplied collateral and confirm transaction.
Please be cognisant of the collateralization ratio. If there is sudden price volatility, it might decrease and your position will be liquidated.
What is the collateralization ratio?
The collateralization ratio is the numeric representation of the safety of your deposited assets against the borrowed assets and its underlying value. The higher the value is, the safer the state of your funds are against a liquidation scenario. A safe collateralization ratio is anything above 150%. If there is any sudden price fluctuations, you should have enough buffer to top up the position. When the collateralization ratio reaches 100 - you will be liquidated. The collateralization ratio is influenced by the liquidation threshold of your collateral in relation to the value of your borrowed funds. You can review all parameters in the risk parameters section of each asset.
How much can I borrow?
The maximum borrowing amount is determined by your supplied value and the available liquidity. For instance, borrowing a specific asset on a specific chain is not possible if there is insufficient liquidity or your collateralization ratio doesn't allow it. You can find details about each asset and its parameters in the "Details" page.
How much would I pay in interest?
The interest you pay for borrowing assets depends on the borrowing rate, which fluctuates based on the asset's utilization rate. You can always check your current borrowing rate in the Portfolio Overview page of the "Portfolio".
What happens when my collateralization ratio falls?
As the value of your supplied assets fluctuates, so will your collateralization ratio. An increasing collateralization ratio strengthens your borrowing position by making liquidation less likely. Conversely, if the value of your collateralized assets declines relative to your borrowed assets, the collateralization ratio decreases, elevating the risk of liquidation.
When do I have to payback my loan?
You're not bound by a fixed period to repay the loan. You can maintain the loan indefinitely as long as your position remains safe & healthy. However, remember that over time, accruing interest will lower your collateralization ratio, potentially leading to liquidation of your deposited assets, especially since interest rate is variable.
What assets are required for repayment?
How do I repay?
To repay the loan, navigate to the Borrowed Assets section of your "Portfolio" page, click the repay button for the asset you borrowed, choose the amount, and confirm the transaction.
How do I avoid being liquidated?
To avoid liquidation, either repay part or all of your loan, or deposit more assets to boost your collateralization ratio. Out of these options, repaying the loan will more effectively increase collateralization ratio.
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