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Users can supply the following assets to the Tonpound protocol: pTON, ETH, WBTC, USDT, USDC, and DAI. The pools for each token have a Supply Cap to prevent overexposure of the protocol to one or another asset. Once supplied, collaterals start to generate rewards (Supply APR) for the user in the same token. The rewards are calculated and accrued to user accounts with each Ethereum block.
pTON is an ERC-20 token developed by the πTON staking solution, which makes TON staked on The Open Network available for trading on Ethereum blockchain. Please refer to the πTON documentation for more details on how to use pTON.
Tonpound DAO can initiate the process of adding more assets to Markets or optimizing their parameters like Demand Curves. After a successful vote, the changes to the protocol will be carried out by the developer team.
Tonpound users can also borrow any of the protocol Supply assets as long as there is enough liquidity available. To take a loan, borrowers have to provide a collateral whose value must exceed the amount lent by a certain threshold (minimal Collateral Factor). For example, the Collateral Factor for ETH of 80% means that users will be able to borrow up to 80% of funds value on their Supply balance.
After borrowing, an interest rate is applied to the user's balance (Borrow APR) every block until they return their loan. If the value ratio of the loan to collateral falls below a certain threshold, the position can potentially be liquidated (see Liquidation).
Supply and Borrow rates for each asset on Tonpound are set by Demand Curves and Utilization. A higher utilization (more borrowed funds compared to the assets supplied) leads to the larger APRs for a particular market. This motivates lenders to post more collateral or makes borrowers cover their loan, implicitly increasing the amount of available funds on the protocol.
For each Market asset, the Borrow APRs are consistently higher than the Supply APRs, resulting in a surplus of funds. This represents the protocol's income which can later be claimed by the holders of Tonpound's governance NFTs. The fee size or the shape of the Demand Curves can be adjusted through community voting.
Liquidation is the process of coercively closing a borrower’s account, if its collateralization falls below the liquidation threshold. It is necessary to keep the lending protocol solvent, preventing the overall debt from exceeding the value of Supply assets that are backing it.
The liquidation threshold is a ratio which is calculated identically to the collateral factor (borrowed value versus supplied). However, the liquidation threshold is always set higher than the collateral factor to put the minimum starting balance of every account at some margin from the liquidation.
After an account surpasses the liquidation threshold, it is not automatically closed yet but receives the “liquidatable” status. In that case, Tonpound users that are eligible to the liquidator role can buy out the remaining collateral.