FAQ

How does the first strategy work?

Borrowers put up collateral and receive a loan in excess (up to 4x) their collateral. The loan goes into their prime broker smart contract. Borrowers then can create, increase, and decrease positions on GMX in whitelisted markets. When increasing a position, the loan asset (USDC) is swapped for long token on GMX and then used to collateralize a 1x short. When decreasing, after closing the portion of the position, the long token is sold back for loan asset. Borrowers can swap assets in their prime broker that aren’t USDC and either harvest profit after repaying or at any point as long as a margin is maintained beyond the size of the loan.

How can borrowers use loans?

After selecting a strategy, borrowers can establish a loan within the strategy account and deploy a leveraged position. Each strategy comprises a set of predefined actions borrowers can perform with their loaned assets (e.g., Delta Neutral Funding Rate Farming). The strategy contract will continually monitor positions to ensure they adhere to the strategy's parameters.

What is the lending experience?

Similar to Aave, lenders put in capital and receive an ERC20 representing their portion of the lending pool. The pool accrues yield continuously, and when lenders burn their ERC20, they will receive more capital back than they lent unless there are no borrowers or there is loan loss.

How are lender and borrower interest rates calculated?

GoldLink currently calculates interest rates using a kinked rate-slope model. The interest rates will adjust in line with the lending pool's utilization rate.

Is there an insurance pool?

Each GoldLink strategy has a dedicated insurance fund. The insurance fund grows by taking a percent of the borrow cost and liquidation premium, ensuring that insurance reserve size correlates with the associated strategy risk.

How are funds on the platform secured?

GoldLink has taken several steps to mitigate the risks typically associated with undercollateralized lending. Each strategy continuously tracks all loaned assets and positions, rebalancing or closing any positions that do not remain within the strategy's predefined criteria. Additionally, if a strategy account’s health score falls below the liquidation threshold, the loan will be liquidated, and lenders will be repaid using the borrower’s collateral. In the event that borrower collateral is not able to fully cover lender capital, the insurance fund will be used to mitigate loan-loss.

How are liquidations and rebalances/releverages motivated?

When a user is liquidated GoldLink employs the Euler model of taking collateral to 1. pay the executor 2. cover loss 3. increase the insurance fund. When a borrower needs a rebalance or releverage a “soft-liquidation” is made. The soft-liquidator is paid a very small fee and in many cases not only is the borrower still holding their loan but their position also still exists.