Why would I mint wenUSD?

Wen protocol's no-interest loans are much more capital efficient than other lending protocols. Less collateral is needed for the same loan amount. Instead of selling your ETH/LSDs , you can lock up your LSDs as collateral on and mint wenUSD against that collateral. Then repay the loan later on.

For example, ETH bulls can leverage their LSDs positions up to 6.66x by minting wenUSD, which amplifies their LSDs exposure and potential gains. It works cause you can borrow wenUSD with collateral, swap that wenUSD for more LSDs, and repeat the process.

Not financial advice: Leverage can 6.66x gains but also 6.66x losses. Use with caution if you're experienced with leveraging crypto positions.

What means collateral?

Collateral essentially means an asset that is used as a guarantee that the borrower will repay the loan. If the borrower fails to repay the loan, the lender can seize the collateral to recover some of their losses.

In the case of WEN Protocol, LSDs are used as collaterals. Users deposit a certain amount of assets into the protocol as collateral in order to take out a loan in the form of wenUSD. If the borrower fails to repay the loan, the protocol would liquidate the deposited collateral to cover the loan amount.

The amount of collateral required depends on the loan-to-value (LTV) ratio. Wen Protocol allows borrowers to leverage their crypto positions up to 6x, meaning for every 1 LSD deposited as collateral, they can borrow up to 6x wenUSD worth of LSD.

How is the minting fee calculated?

The minting fee on Wen Protocol is calculated as follows:

  1. There is a baseRate that determines the percentage fee, ranging from 0.5% to 5%.

  2. The baseRate is adjusted algorithmically based on the last redemption time. If more redemptions are happening (wenUSDis trading below $1), the baseRate will trend upwards. If fewer redemptions are happening (wenUSD is trading above $1), the baseRate will trend downwards.

  3. The baseRate percentage is applied to the amount of wenUSD minted to determine the minting fee amount.

  4. The minting fee and annual fee is added to the borrower's total debt. So the total debt after the fee would be:

    • Total Debt = wenUSD minted + Minting fee + Annual fee

  5. Annual fee is the cost of your debt over time.

For example:

  • baseRate = 0.5%

  • AnnualFeeRate = 1.5%

  • wenUSD minted = 1,000

  • Minting fee = 0.5% of 1,000 = 5 wenUSD

  • Total debt right after the mint = 1,000 wenUSD(minted) + 5 wenUSD(fee) + 0 Annual fee = 1,005 wenUSD

  • Total debt after 1 year = 1,000 wenUSD(minted) + 5 wenUSD(fee) + 1.5%*1,000 Annual fee = 1,006.5 wenUSD

How can I mint wenUSD ?

To mint wenUSD, users should:

  1. Open a Trove - This is like a borrower account on WEN Protocol.

  2. Deposit LSDs as collateral - Users deposit assets into their Trove to use as collateral for the loan.

  3. Mint wenUSD - Once collateral is deposited, users can once draw up to c.a. 86.95% of the deposited assets value in wenUSD.

  4. Minimum debt - There is a minimum loan size of 2,000 wenUSD to open a Trove.

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