#dusk $DUSK @Dusk I deposited some test assets on Dusk Trade and wanted to try borrowing with different types of collateral. Logically, assets are assets, so their collateral value should be the same—but the results were completely different.
First, I deposited some native BTC and wanted to see how much I could borrow. I found that the collateral factor for native BTC was much lower than I expected. With the same value, if I deposited WBTC or stablecoins, I could borrow more. At first, I thought there was some miscalculation somewhere.
After digging through the documentation, I understood that Dusk Trade uses separate collateral factors for different assets. Native BTC’s collateral factor on this platform is more conservative because Dusk Trade’s trading history for native BTC is too short. WBTC and stablecoins have had years of trading history across various DeFi platforms, so the risk model is well understood. But for native BTC, the platform doesn’t have enough historical data to price liquidity risk.
It’s a bit like traditional banking logic. If you’ve had an account at a bank for ten years, with a complete credit record, and you offer property as collateral, you can borrow more. But if you’re a new customer—someone with a newly formed company—the bank will be more conservative and assign a lower collateral factor.
In the early stages of native BTC lending, this is actually pretty reasonable. The platform needs real market data to calibrate risk. But this also means that if you lock native BTC in to borrow today, your capital efficiency is discounted. Only once native BTC’s trading volume and history on Dusk Trade are long enough will the collateral factor be adjusted upward.
I can’t verify whether the collateral factor will truly increase over time, or how long it might take. The current numbers are only based on the platform’s risk model today.
There’s another question I’m still thinking about: if you’re an institutional investor, when you lock native BTC as collateral to borrow, you’re essentially betting that “as the platform accumulates enough trading history, this factor will improve.” But if the improvement is slow—or never happens—then the capital efficiency you locked in early will never recover. That’s a real risk for institutions.
First, I deposited some native BTC and wanted to see how much I could borrow. I found that the collateral factor for native BTC was much lower than I expected. With the same value, if I deposited WBTC or stablecoins, I could borrow more. At first, I thought there was some miscalculation somewhere.
After digging through the documentation, I understood that Dusk Trade uses separate collateral factors for different assets. Native BTC’s collateral factor on this platform is more conservative because Dusk Trade’s trading history for native BTC is too short. WBTC and stablecoins have had years of trading history across various DeFi platforms, so the risk model is well understood. But for native BTC, the platform doesn’t have enough historical data to price liquidity risk.
It’s a bit like traditional banking logic. If you’ve had an account at a bank for ten years, with a complete credit record, and you offer property as collateral, you can borrow more. But if you’re a new customer—someone with a newly formed company—the bank will be more conservative and assign a lower collateral factor.
In the early stages of native BTC lending, this is actually pretty reasonable. The platform needs real market data to calibrate risk. But this also means that if you lock native BTC in to borrow today, your capital efficiency is discounted. Only once native BTC’s trading volume and history on Dusk Trade are long enough will the collateral factor be adjusted upward.
I can’t verify whether the collateral factor will truly increase over time, or how long it might take. The current numbers are only based on the platform’s risk model today.
There’s another question I’m still thinking about: if you’re an institutional investor, when you lock native BTC as collateral to borrow, you’re essentially betting that “as the platform accumulates enough trading history, this factor will improve.” But if the improvement is slow—or never happens—then the capital efficiency you locked in early will never recover. That’s a real risk for institutions.
