Case Study B: USDY/mETH

SUMMARY

A simplified case of one lending and borrowing intent each. Borrowing mETH with USDY as collateral.

Lender A: Intent Specs

Parameter	Value
Collateral Asset	USDY
Supply Asset	mETH
Strike Price	0.00068868
Reserve Price	0.0007
Interest Rate(r)	20% pa
Term(t)	30 days

For Strike Price, 0.00068868 translates to 0.68868 mETH per 1000 USDY. And 0.0007 Reserve Price translates to 0.7 mETH per 1000 USDY.

Borrower A: Intent Specs

Parameter	Value
Collateral Asset	USDY
Borrowed Asset	mETH
Collateral Amount	2000 USDY
Borrow Amount	1.37736 mETH
Interest Rate(r)	20% pa
Term(t)	30 days

Borrow Amount(Strike Price) Calculation

$$\text{Borrow Amount}=\frac{\text{Reserve Price}}{\text{Interest Factor}}=\frac{0.0007}{1+0.2\left(\frac{30}{365}\right)}=0.00068868\text{mETH}$$

Borrow amount(Strike Price) is what the borrower receives by escrowing 2000 USDY as Collateral according to the Lender A intent. Borrower A has to repay 0.02264 mETH as interest.

What can the borrower do?

• Repay (partial/full): Borrower can repay anytime before the term ends in part or in full. If the borrower repays in part, borrower can claim collateral back in pro-rata share of full repayment amount. Eg. If the borrower repays 1 mETH, borrower can unlock mETH.$$\text{Collateral Unlock Ratio}=\frac{\text{Repayment}}{\text{Total Repayment}}$$$$\text{i.e. }\frac{\text{1 mETH}}{\text{1.4 mETH}}=0.7143$$

$$\text{i.e. }0.7143\times 2000\text{USDY}=1428.6\text{USDY claimable}$$

• The borrower can repay anytime to unlock full collateral by paying total interest due. Borrower may also choose to not repay at the cost of forfeiting the escrowed collateral of 1 mETH.

• Leverage: Borrower can swap borrowed mETH for USDY to borrow again from the protocol. MethLab natively provides leverage through the use of a DEX eliminating the need of manual looping.