DBR
DOLA Borrowing Rights
Basics
DBR Issuance
Recharging & Liquidations
Examples
Use Cases
Token Address: 0xAD038Eb671c44b853887A7E32528FaB35dC5D710
DBR is an ERC20 token that represents your right to borrow DOLA in FiRM, Inverse's fixed rate lending protocol. A user with a single DBR has the right to borrow one DOLA stablecoin for up to one year with no interest.
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.
The duration is not fixed so you can borrow two DOLA for six months, four DOLA for three months, and so on. Borrowing one DOLA for one year will gradually consume that DBR token.
DBR is available to purchase both on UniswapV3 and Balancer and is traded against DOLA.
You can also input the DBR token address (listed above) into either Balancer or Uniswap, or any Dex aggregator (Cow, 1inch, LlamaSwap, Matcha, etc). Ensure the slippage is within an acceptable range before executing the trade.
DBR is issued to FiRM’s xINV holders each block (INV stakers) and they can claim their accumulated DBR at any time. DBR is issued at a rate set by the DBR Distributor role which will be held by the Fed Chair.
An increase in DBR supply will generally lead to a lower DBR price which in turn makes borrowing DOLA more attractive. As DBR is burned over the life of a DOLA loan the DBR rewardRate will correspond to the amount of DOLA loans on FiRM. The Fed Chair determines whether this quantity should be maintained, increased or decreased.
To maintain the amount of DOLA loaned on FiRM, the yearly DBR reward rate should be set to roughly match the amount of DOLA loans in FiRM. This means that the circulating supply of DBR will be kept level with the DBR that is being burnt.
To expand the amount of DOLA lent out on FiRM, the yearly DBR reward rate should be set to a DOLA target. For example, if 5MM DOLA is loaned on FiRM but the target is 8MM DOLA, the DBR reward rate should be set to 8MM DBR. DBR supply contraction reverses the process and sets a DBR reward rate that is lower than the amount of DOLA borrowed in FiRM.
If a user’s DBR balance turns negative while borrowing DOLA, additional DBR’s are added by any 3rd party for a fee to the user’s wallet to maintain a positive DBR balance. The cost of additional DBR’s during Recharge is paid by adding DOLA debt to the user’s loan balance. DBR’s purchased via Recharge is priced at a substantial premium to market DBR pricing to incentivize responsible loan management and to avoid having to rely on oracle infrastructure.
The Recharge feature can be repeated if the borrower fails to top-up their DBR balance or repay their loan, until the borrower’s DOLA loan balance reaches the maximum collateral factor for the loan, triggering a liquidation process.
The liquidation process follows common DeFi liquidation practices where a fee (e.g., 10%) is collected by third-party liquidators who successfully repay loans that have become eligible for liquidation due to a breach of a borrower’s collateral factor. An additional liquidation fee may also be charged by the Inverse Finance DAO treasury. Inverse Finance DAO reserves the rights to alter the current liquidation process in future updates to the FiRM protocol. Any modifications would require a DAO vote via on-chain governance.
Here are five examples to illustrate the basic application of DBR’s:
- 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.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.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.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.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.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.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.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.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.
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.
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.
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.
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.
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.
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.
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.
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 traditional finance instruments like U.S. Treasury bonds, since both borrowing costs and bond yields are fixed.
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.
Last modified 5d ago