bZx Network, a decentralized margin lending protocol and liquidation oracle marketplace on the Ethereum blockchain, has announced the launch of Torque. It is a new borrowing platform with indefinite-term loans and fixed interest rates operating as both an app and a DApp.
Torque works with any Web3 wallet such as Metamask, but it also works with every other type of wallet. This is enabled by Torque’s first-of-its-kind Ethereum Name Service (ENS) loan system which allows users to borrow assets by simply sending collateral to a human-readable ENS domain from any wallet.
How it Works
Simply, a user interacts with the Torque interface to specify a loan amount and accepts the transaction using their Web3 wallet. Alternatively, the user sends the collateral to the appropriate ENS address, e.g., dai.tokenloan.eth. In this example, the user receives a DAI loan collateralized in ETH.
Torque loans are loans borrowed from Fulcrum iToken lending pools. Fulcrum is bZx’s tokenized margin trading interface
Users can deposit ETH or any ERC20 supported by Fulcrum as collateral against a loan. Each collateral type has its own collateral ratio, reflected in the initial margin and margin maintenance parameters. Since many supported ERC20s have poor liquidity, especially on DEXs, ERC20s used as collateral will have an initial margin of 250% and margin maintenance of 200%. On the other hand, ETH and stablecoins will have an initial margin of 150% and margin maintenance of 115%. This allows collateral types with low liquidity to be used while still protecting lenders from the volatility of a borrower’s position.
Maintenance
Loans run indefinitely on their own until the collateralization of the loan goes below margin maintenance, requiring a margin call. It is advisable to either liquidate a small amount of collateral or deposit additional borrowed tokens to extend the life of the loan once it has been open for three months.
However, this is not required, and the cost of failing to do so amounts to only a few dollars a year. Borrowers can top up their interest deposit at any time, extending the life of their loan. Torque has a decentralized, incentivized system for users to monitor and extend the life of loans that are close to running out of interest.
Closing Loan
To close a loan, users simply send back the borrowed amount plus interest to the Torque smart contract address that issued the loan, if using the Web3 interface. This will release borrowed funds from escrow back to the originating wallet as well as refund unpaid interest. Torque allows users to do a partial repayment at any time and reclaim a portion of the escrowed collateral.
If using the ENS interface, during initiation of the loan an ENS subdomain is created representing the specific wallet address opening the loan e.g., [address].dai.tokenloans.eth, and repayments must be first sent there before sending a 0 ETH transaction to dai.tokenloans.eth to execute loan closure. This makes ENS loans initially more gas intensive than loans opened using the Web3 interface.
Margin Calls
Torque uses the same bZx margin calling system as Fulcrum. An incentivized network of bounty hunters monitors positions and calls liquidate if a position is under margin maintenance. Since borrowed funds have been withdrawn from the borrower’s wallet, partial liquidations are not possible. One feature that is favorable to lenders is that there is no % based penalty for being margin called.
Interest Rates
Loans are sourced from Fulcrum’s iToken lending pools. These lending pools have algorithmically determined interest rates based on supply and demand. Torque loans function slightly differently from Fulcrum loans because of their indefinite term.
“Torque presents users the easiest borrowing experience in the industry, requiring only a single transaction, while providing all the power and flexibility of existing decentralized borrowing platforms. Since it draws from Fulcrum’s liquidity pools, Torque will have deep liquidity starting from day one.”
“We believe that ENS loans represent a major advancement in user experience, both because it eliminates reliance on web3 wallets and because it cuts the number of transactions needed to secure a DAI loan with ETH down to just one. If you are a developer, Torque also provides a case study in the power of protocols, as Torque did not require substantial smart contract development — the tools were already there. This is why we are able to ship Torque only three months after launching Fulcrum.”
– BZx Network Team
For more information on the protocol, and notification for when Torque goes live, visit the official website.