ETH Loans are live on Layer Two through Staking
We’ve integrated the Synthetix loans feature directly into the Staking dapp on Layer Two (Optimistic Ethereum). Loans have been live on mainnet for almost a year now, and we’re excited to allow more of our users access to sUSD loans.
Loans are essential as an onboarding option for Synth traders and a convenient source of extra sUSD for SNX stakers to manage their staking positions since sUSD can be in high demand across the DeFi ecosystem, particularly around the fee period snapshots.
Loans Tutorial
Step 1: Ensure that you’re connected to Optimistic Ethereum through your wallet.
Step 2: Visit the interface at https://staking.synthetix.io/loans
Step 3: Input the amount of ETH you’d like to use as collateral, then input the amount of sUSD you’d like to borrow.
Take note of the C-Ratio, Interest Rate, and Issuance Fee.
Step 4: Click Borrow sUSD! You’ve successfully borrowed sUSD with ETH as collateral. Monitor your C-Ratio to ensure you aren't liquidated.
Interest rates, Issuance Fee, and Other Fees
There are two fees associated with borrowing sUSD. One is an ongoing interest rate based on an annualized percentage. The other is a flat issuance fee.
At the time of writing, the interest rate is 3.00%. An issuance fee is paid when taking out the loan, which is currently 0%.
Interest rates and issuance fees are dynamic and change with the amount of sUSD debt the protocol incurred from ETH collateral. Protocol governance can also adjust the calculation of the fees.
There is no time limit for paying back a loan.
For information on how loans work in greater detail, check out SIP-97.
Liquidation risk
When loans are taken out in a different asset type to its collateral (e.g., sUSD against ETH), there is a partial liquidation mechanism for loans that fall below the liquidation ratio (currently 120%).
Liquidators (i.e., any person or bot) can liquidate a loan when the collateral value drops below the liquidation ratio, incurring a 10% fee from the liquidated amount that goes to the liquidator as a reward.
If you have any questions about how this works, join us in Discord!