#termmax @TermMax Imagine TermMax is an automated cryptocurrency pawnshopđ° Letâs look at an example between Ivan (borrower) and Maria (lender)
Ivan has 1 ETH valued at $2000 he doesnât want to sell it, but he needs USDC. Maria has USDC and wants a guaranteed return on it.
Ivan locks 1 ETH in the TermMax smart contract. In return, he receives a GT (NFT) a unique receipt that confirms his right to the ETH after the debt is repaid and 1000 FT debt tokens.Each 1 FT obligates the system to pay out $1 USDC after one year. That is, a debt of 1000 USDC has been created using the collateral. Ivan has locked his ETH, holds the NFT-receipt and 1000 FT-debt tokens
Ivan needs dollars,not debt tokens. In the market, Maria offers to buy his FT-tokens, but with a discount. Maria offers $0.80 for one FT. Ivan sells 1000 FT to Maria. Ivan receives $800 USDC. Maria spends $800 USDC and receives 1000 FT. Ivan received $800, but in one year he has to pay back $1000 (fixed rate- $200). Maria has invested $800 and will guaranteed receive $1000 in one year (fixed profit+ $200)đ€
For the system to always understand the value of the debt, TermMax uses a technical token XT. The formula applies: 1 FT+ 1 XT= 1 USDC, always. When Ivan sold the FT for $0.80, XT automatically started to cost $0.20. XT compensates for the discount and allows smart contracts to easily calculate the value of the loan and the collateral. This is an automatic mechanism under the hood.
In one year the maturity date arrives. Ivan wants to retrieve his 1 ETH, which now costs $3000. He has two options.
Option A direct repayment: Ivan brings 1000USDC, the protocol burns his debt and NFT, and hands him his 1 ETH. Maria collects her $1000.
Option B debt arbitrage: Ivan sees in the market that FT-tokens are trading at $0.95. Instead of 1000 USDC into the protocol, he buys 1000 FT in the market for $950. He brings these 1000 FT to the protocol, closes the debt and retrieves his 1 ETH. Ivan has closed a debt of $1000 having spent only $950đ
Ivan has 1 ETH valued at $2000 he doesnât want to sell it, but he needs USDC. Maria has USDC and wants a guaranteed return on it.
Ivan locks 1 ETH in the TermMax smart contract. In return, he receives a GT (NFT) a unique receipt that confirms his right to the ETH after the debt is repaid and 1000 FT debt tokens.Each 1 FT obligates the system to pay out $1 USDC after one year. That is, a debt of 1000 USDC has been created using the collateral. Ivan has locked his ETH, holds the NFT-receipt and 1000 FT-debt tokens
Ivan needs dollars,not debt tokens. In the market, Maria offers to buy his FT-tokens, but with a discount. Maria offers $0.80 for one FT. Ivan sells 1000 FT to Maria. Ivan receives $800 USDC. Maria spends $800 USDC and receives 1000 FT. Ivan received $800, but in one year he has to pay back $1000 (fixed rate- $200). Maria has invested $800 and will guaranteed receive $1000 in one year (fixed profit+ $200)đ€
For the system to always understand the value of the debt, TermMax uses a technical token XT. The formula applies: 1 FT+ 1 XT= 1 USDC, always. When Ivan sold the FT for $0.80, XT automatically started to cost $0.20. XT compensates for the discount and allows smart contracts to easily calculate the value of the loan and the collateral. This is an automatic mechanism under the hood.
In one year the maturity date arrives. Ivan wants to retrieve his 1 ETH, which now costs $3000. He has two options.
Option A direct repayment: Ivan brings 1000USDC, the protocol burns his debt and NFT, and hands him his 1 ETH. Maria collects her $1000.
Option B debt arbitrage: Ivan sees in the market that FT-tokens are trading at $0.95. Instead of 1000 USDC into the protocol, he buys 1000 FT in the market for $950. He brings these 1000 FT to the protocol, closes the debt and retrieves his 1 ETH. Ivan has closed a debt of $1000 having spent only $950đ