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Credit Token

Reason why users can borrow money from Prestare with less than 100% collaterals.

How will Credit Token (CRT) be minted?

Credit Token (CRT) will be minted when a user makes a repayment. The number of Credit Token minted corresponds to the amount of interest payment and types of assets. For example, if a user pays $100 ETH interests and the Credit Reserve Factor of ETH is 20%, therefore $20 interest will be converted into stablecoins and put in the credit reserve pool and meanwhile, 20 CRT will be minted. CRT minted will be sent to the CRT staking pool directly.

Credit Reserve Pools

There are different credit reserve pools for storing the interests borrowers paid and each credit reserve pool consists of one type of stablecoins. For those lending pools whose currencies are stablecoins, a certain portion of interests paid by users will be sent to its credit reserve pool directly; for those whose currencies are not stablecoins, the interests will be converted into stablecoins before being saved into the credit reserve pool.

Using Credit Token as collaterals

While users who don’t have credit tokens will not have a lower collateral ratio, users who stake CRTs in the CRT pools can enjoy the collateral discount when they need a loan. Prestare will calculate the maximum borrowing amount for the account, the more CRT the account has, the more amount it can borrow. After the account makes a repayment, the CRT locked during borrowing will be unlocked and newly minted credit tokens will be sent to that account.

Usages of Credit Token (CRT):

  1. 1.
    A portion of interest paid by borrowers will be reserved in ‘Credit Reserve Pool’. 1 CRT is minted with $1 in the pool, then distributed to borrowers who contributed to the pool. CRT can be used for collateral in the next borrowing, making the loan under-collateralized.
  2. 2.
    CRT holders who do not want to have a loan with Prestare can stake their CRT. When liquidation happens, the default loan’s collateral will be swapped into stablecoins and then saved into the credit reserve pool. The bonus CRT minted will be sent to the CRT stakers in proportion to the percentage of liquidity they provide in the pool.
  3. 3.
    Users can directly redeem CRTs for stablecoins at $0.6, which is slightly higher than the floor price of $0.574.