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DBR Strategies

Rethink The Way You Borrow

DOLA Borrowing Rights

DBR's provide the holder the right to borrow DOLA in FiRM. DBR’s solve issues of highly volatile interest rates in traditional variable rate lending and DBR removes many of the constraints of conventional fixed rate interest lending in DeFi. Users benefit from the certainty of fixed-rate loans while gaining both short and long-term optionality and opportunities from DOLA Borrowing Rights.

Use Cases for DBR-based Loans

The introduction of DBR’s provides for a broader set of use cases for DOLA loans than is typically possible or practical with variable rate loans. A sample of these new use cases includes.
Yield Farming
DBRs enable yield farmers to borrow at predictable rates over long time periods, eliminating the uncertainty of interest rate spikes common in variable rate lending. Yield farmers who “loop” their strategies are assured that their DOLA borrowing rate will not spike and eventually trigger a cascade of liquidations. Additionally, in the case where yield farming activities rise, a farmer utilizing DBR could capture profits (from higher DBR prices) at the very moment that underlying farming activities are becoming less profitable.

Real World Assets

DBR’s are ideal for borrowers financing “real world” assets (“RWA’s”) like home down payments, a car, or college tuition. Financing costs can be fixed for many years and like yield farming, DBR’s solve for the uncertainty of variable rate borrowing or the hidden costs of other “fixed rate” lending. DBR’s also enable sellers of RWA’s like a home to “transfer” their 11 (below market rate) DBR’s along with the asset itself to a buyer, like real-world assumable mortgages.

Rate Locking

Potential borrowers wishing to “lock in” a borrowing rate in advance of executing a loan can do so by purchasing DBR’s and holding them until the loan is executed. Borrowers and investors concerned about future rate increases may wish to accumulate DBR’s as a hedge against future rate rises.

Insurance/Cover

DBR’s enable users to borrow at a fixed rate to purchase cover from projects like Nexus Mutual, making the cost of using leverage to purchase cover more predictable.

Collars

DBR’s enable users to limit downside losses on assets by borrowing at a fixed rate against the asset to purchase put options from projects like Hegic, making the cost of using leverage to collar a position more predictable.

Rate Arbitrage

DBR’s enable traders to implement new interest rate strategies that rely on fixed rate leverage to execute against arbitrage opportunities with rates on other lending protocols or even with TradFi instruments like U.S. Treasury bonds, since both borrowing costs and bond yields are fixed.

DAO Treasury and Payroll Operations

DBR’s enable DAO’s to borrow against dormant Treasury assets without the uncertainty of variable rates, enabling the Treasury to fund operational expenses like payroll or liquidity mining. DAO expenses can be paid utilizing DBR’s to avoid negative price action on governance tokens, which themselves can be safely and predictably staked as collateral for DOLA loans.

Example Loans

Here are three examples to illustrate the basic application of DBR’s:

One Year Loan

  1. 1.
    Jack deposits $1,000 in WETH as collateral and borrows $800 in DOLA. He plans to hold the loan for one year so acquires 800 DBR’s for $0.02 each. The $16 payment for the DBR’s is subtracted from Jack’s $800 DOLA loan at the time of borrowing.
  2. 2.
    Jack’s balance of 800 DBR’s is decremented on a time basis, so for every DOLA borrowed, the DBR balance is reduced by 0.xxxxxxxxx DBR every second or 1/365 per day.
Multi-Year Loan
  1. 1.
    Jack deposits $1,000 in WETH as collateral and borrows $800 in DOLA. He plans to hold the loan for three years so acquires 2,400 DBR’s for $0.02 each. The $48 payment for the DBR’s is subtracted from Jack’s $800 DOLA loan at the time of borrowing.
  2. 2.
    Jack’s balance of 2,400 DBR’s is decremented on a time basis, so for every DOLA borrowed, the DBR balance is reduced by 0.xxxxxxxxx DBR every second or 1/365 per day.
Short-Term Loan
  1. 1.
    Jack deposits $1,000 in WETH as collateral and borrows $800 in DOLA. He plans to hold the loan for three days so acquires 6.58 DBR’s for $0.02 each. The $0.13 payment for the DBR’s is subtracted from Jack’s $800 DOLA loan at the time of borrowing.
  2. 2.
    Jack’s balance of 6.58 DBR’s is decremented on a time basis, so for every DOLA borrowed, the DBR balance is reduced by 0.xxxxxxxxx DBR every second or 1/365 per day.
Loan Period starting at a Future date
  1. 1.
    Jack predicts he will soon need to take out a loan to pay for college tuition and purchases 1000 DBR as the price drops to $0.01, realizing the rate is far superior to other DeFi and traditional lending markets and that DBR price is unlikely to remain so cheap.
Simple Carry
  1. 1.
    Jack has found a good yield opportunity for DOLA and he has 10 WETH that he wants to make productive. He decides to deposit it into FiRM to borrow DOLA which he in turn will use to farm yield in a Velodrome liquidity pool on Optimism. Jack borrows 50.000 DOLA and includes the purchase of 50.000 DBR in the transaction which brings the total debt to 52.500 DOLA.
  2. 2.
    Jack now deposits the DOLA in one of his favorite yield strategies, earning more than the cost of the loan. If the yield from the liquidity pool declines below his DBR cost for the DOLA loan, Jack can repay the loan and sell the remaining DBR.