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ERD is a decentralized lending protocol that allows you to borrow using specified collateral as collateral. The loan is paid in USDE (a stablecoin pegged to the US dollar) and requires a minimum collateralization ratio of 110%. In addition to collateral, loans are secured by a stable pool containing USDE and other borrowers who collectively act as the final guarantors. Learn more about these mechanisms in the liquidation module.
ERD’s key benefits include:
- Low interest rates - as borrowers, we only charge a small percentage of the interest rate.
- Minimum collateralization ratio of 110% - more efficient use of deposited collateral.
- Direct redemption - USDE can be redeemed for its underlying collateral at face value at any time.
- Decentralization - USDE is always generated by collateral Backed by the Protocol and is immutable.
The contracts can be upgraded. As a protocol, the ultimate goal of ERD is complete decentralization, but in the early stage, in order to cope with extreme situations, we will gradually transfer ERD's administrative rights to ERD DAO and DAOs of top protocols in the Ethereum ecosystem (such as Curve, Uniswap, etc.) for joint governance to eliminate potential risks associated with using ERD, Ultimately achieve complete decentralization.
- 1.Borrow USDE by opening the treasury and using collateral.
- 2.Provide USDE to the stabilizing pool in exchange for liquidation rewards to ensure the operation of the ERD liquidation mechanism.
- 3.Exchange 1 USDE for collateral worth 1 USD when the price of USDE is below 1 US dollar.
No. At least not at this stage. We want to focus on USDE.
To borrow USDE, you only need a wallet (such as MetaMask) and enough collateral to open a Trove, and you may also need some ETH to pay gas fees.
To become a stable pool depositor, you need to own USDE tokens. USDE can be borrowed by opening a Trove. You can also buy the token on the public market using Curve or other exchanges.
There is a one-time fee charged each time USDE is borrowed and when it is exchanged:
- For redeemers, there is a redemption fee for the amount paid to the user in collateral when exchanging USDE back to collateral. Please note that redemption is separate from repaying the loan as a borrower, which is free.
Both fees depend on the redemption volumes, i.e. they increase upon every redemption in function of the redeemed amount, and decay over time as long as no redemptions take place. The intent is to throttle large redemptions with higher fees, and to throttle borrowing directly after large redemption volumes. The fee decay over time ensures that the fee for both borrowers and redeemers will “cool down”, while redemptions volumes are low.
The fees cannot become smaller than
0.25%(except in Recovery Mode), which protects the redemption facility from being misused by arbitrageurs front-running the price feed. The borrowing fee is capped at
5%, keeping the system (somewhat) attractive for borrowers even in phases where the monetary is contracting due to redemptions. Other than that, the two fees are identical.
The ERD protocol charges a one-time borrowing and redemption fee that is algorithmically adjusted based on the last redemption time. For example, if there are more redemptions (meaning the trading price of USDE may fall below $1), the borrowing cost will continue to increase, preventing borrowing.
In addition, while you maintain your Trove, we charge very low fees based on the TCR and other conditions of the entire protocol. Because there are one-time borrowing and redemption fees, we try to achieve the lowest possible interest rate while ensuring the health of the protocol. If you want to understand the model of interest rates, please refer to the debt interest rate model.
Currently, there is one way to earn revenue on ERD:
- Deposit USDE into the stable pool and receive liquidation proceeds in collateral units. We will actively expand other ways to earn revenue as the system is released.
As a protocol, we have reviewed our code repeatedly, audited it multiple times, and conducted public audits. However, we cannot guarantee that you are entirely unaffected due to sensitive operations such as token transfers.
You may lose some of your funds in the following two cases:
- As a borrower (treasury owner), your Ethereum collateral has been liquidated. You will keep the USDE borrowed, but your treasury has been closed, and your collateral will be used to compensate stable pool depositors.
- As a stable pool depositor, your USDE is used to repay the debt of a liquidated borrower. Usually, when the borrower's collateral ratio falls below 110%, it triggers a liquidation, so you are likely to receive more collateral returns. However, if the collateral price continues to fall and you hold your position, you may lose some of the value of your stable pool deposits.
Please note that although we have thoroughly audited the system, we cannot completely rule out user losses due to hackers or system vulnerabilities (please refer to the disclaimer).