Idea: Allow borrowers to stake TRU in order to increase their credit limits beyond the unsecured limit that our credit team is comfortable with
Loom of me walking through this proposal ← Watch the Video (can be on 2x speed)
Why Do This?
- Get borrowers more involved in and invested in the success of the protocol
- More usage and utility for TRU
- Increases protocol TVL and utilization (in a safer way)
With our new credit model, we’re taking steps in the right direction of systematizing how we set credit limits for our borrowers. Most of our borrowers would like higher credit limits and we’d like to do this for them, but don’t have a safe way to do this without going past our comfort limits when it comes to risk.
One way we could do this is by allowing borrowers to partially collateralize their loans above the limits that we’re comfortable extending without collateral.
As an example:
- BORROWER_1 has a credit limit of $2,000,000. This means that we are okay with extending them a $2,000,000 loan without collateral.
- We wouldn’t want to go beyond 2mm without collateral, but we might be willing to go up to 3mm if they were willing to post 1mm worth of collateral…
This is a way to scale up growth in a way that we are comfortable with while also giving more utility to TRU and getting our borrowers more involved in the protocol.
How I envision this working:
If a borrower wants to go beyond the unsecured credit limit we assign them, they’d be able to post partial collateral for the amount above our unsecured limit that would be locked on-chain for the duration of their loan.
Example Tiers (numbers below are examples for the purpose of explanation):
If a borrower stakes:
- 250,000 - 1,000,000 TRU: Can borrow up to an additional $2,000,000 at 50% LTV.
- 1,000,000 - 5,000,000 TRU: Can borrow up to an additional $4,000,000 at 50% LTV and receive 1% discount on rates
- 5,000,000 - 10,000,000 TRU: Can borrow up to an additional $7,000,000 at 50% LTV and receive 1.5% discount on rates
- '>10,000,000 TRU: Can borrow up to an additional $10,000,000 at 50% LTV and receive 2% discount on rates
In the above example, even if the borrower did not want to borrow more at the 50% LTV, they’d still be able to have the discount on rates. E.g., if BORROWER_2 has a 10mm unsecured credit limit and only needed to borrow 10mm then they could still have the 2% discount on their unsecured amount if they were staking >10mm TRU.
I don’t believe this at all takes away from the value of unsecured lending (we are very much still doing that), but now we’re expanding our offerings to be able to more scalable grow our borrower pool.
- Yes, but with edits (comment below)