Dens

Dens are at the heart of Beraborrow’s collateral management system, providing users with a way to deposit assets, earn yield, and mint $NECT, all while maintaining exposure to their original collateral. This flexibility allows users to unlock liquidity without having to sell or give up their position in valuable assets.

How Dens Function

When users deposit their assets into a Den, they effectively lock their collateral within the protocol. This enables them to mint $NECT, Beraborrow’s over-collateralised stablecoin, which can then be used throughout the Berachain DeFi ecosystem. The amount of $NECT you can mint is determined by the Minimum Collateral Ratio for that asset.

Beraborrow’s Dens support a variety of collateral types, including liquid staking tokens like $iBGT and $iBERA, as well as other whitelisted assets such as LP positions from Bex and Berps. Once collateral is deposited into a Den, users maintain full exposure to the asset’s price movements or yield accrued, allowing them to benefit from any appreciation in value.

Auto-Compounding Features

One of the key innovations within Beraborrow’s Dens is the auto-compounding feature. Dens are designed to maximise yield by automatically reinvesting any rewards earned from the collateral into more of the same asset. For example, if you deposit a USDC:HONEY BEX LP position into a Den, the protocol will stake the LP into an Infrared vault and then restake any $iBGT earned.

This auto-compounding process increases the amount of collateral over time, allowing users to steadily improve their collateralisation ratio without any manual intervention, decreasing your risk of liquidation. As your collateral grows, you can borrow more $NECT providing additional liquidity and yield opportunities.

The Brime Den

The Brime Den is a protocol-managed reserve designed to shield Beraborrow users from the direct impact of $NECT redemptions. All redemptions are first processed through this protocol-owned Den, ensuring users remain unaffected initially. Once the Brime Den is exhausted, redemptions are then routed through Dens paying the lowest interest rates.

E.g, a user redeems $500 worth of $iBGTwith $NECT, the protocol will always prioritise routing this redemption through the Brime Den before any user, regardless of their Den’s interest rate. The Brime Den would remain at the same monetary value, but will have a higher Collateral ratio as it will now hold $500 more $NECT in exchange for the $500 worth of $iBGT.

The Brime Den is an important piece of protocol structure because it places another layer of protection from the automated deleveraging that redemptions cause.