Understanding Collateral

Collateral in Beraborrow is any asset that a borrower pledges to secure a loan. 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.

Loan duration

Loans issued by the protocol do not have a repayment schedule. Debt can be repaid at any time.

Multiple Collateral Types

The inclusion of Multiple collatoral assets into Beraborrow enables users to maintain exposure to several assets, while freeing up liquidity for use across the Berachain DeFi ecosystem.

Previously, the supply of $NECT was constrained by the circulating supply of $iBGT, which is directly linked to BGT emissions. While this supply will grow over time, it inherently limits the amount of $NECT that can be minted. This means that there would have been a limitation on how much next protocols were available to use. The suppport for multiple collateral enables $NECT to maintain pace with the growth of other protocols within the Berachain ecosystem.

This also significantly increases the pool of assets that can be minted into $NECT. This diversification reduces the volatility of $NECT in response to market movements, ensuring greater stability within the protocol. Simply put, more collateral means a more robust $NECT. One of the main use cases for a CDP platform like ours is leverage. This process involves depositing the volatile asset, ie $iBGT and selling the $NECT minted from the protocol for more $iBGT. This creates sell pressure on the $NECT, so you need a lot of liquidity in order to enable/facilitate all that looping/sell pressure. With more collateral options available, there is greater liquidity in the system, enabling more leverage and looping opportunities.

Where does this collateral sit?

Each depositor will have their own DEN, which represents your position on a certain collateral type (e.g. $iBGT) and is linked to your Berachain address.

They maintain 2 balances, your collateral balance and the $NECT debt balance. Both of these balances are adjustable via repayments, collateral additions and removals... as long as the LTV (Loan To Value) doesn't descend over critical amounts.