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The Red Bank
Summary
The Red Bank is a set of smart contracts where users can deposit assets and potentially earn fees generated by borrowers of those assets. Depositors can optionally use their deposits as collateral to borrow additional assets.
Depositing & Lending
Similar to the existing money market protocols, Mars will support non-custodial, over-collateralized borrowing. We call this Contract-to-Borrower (C2B) lending.
A user deposits funds in Mars Protocol’s liquidity pools, for which they will receive maAssets in return. These maAssets represents his or her share in the pool. A depositor can earn a portion of the fees generated by borrowers.
A depositor also has the option to borrow assets from the protocol following ongoing Loan-To-Value (LTV) limits. Lenders’ already deposited assets act as collateral here.
A borrower can get liquidated if their collateral falls below the minimum liquidation threshold.
Lending thus serves two purposes: generating yield and, if the user chooses, acting as collateral to borrow against. The interest rates paid by borrowers and received by lenders are determined algorithmically, taking into account supply and demand by targeting an optimal utilization rate (more on this in the Dynamic Interest Rate Model section below).
Mars launched with support for lending and borrowing UST and LUNA. Since Mars is asset-agnostic — able to support any CW20 or native Terra asset — the community will then be able to propose further assets to be added. Each asset listing proposal must define the asset’s risk parameters (liquidation fee, max LTV, optimal utilization rate, maintenance margin) and whether the asset can be used as collateral. The Mars Risk Framework provides an open-source framework for assessing the riskiness of assets and setting appropriate risk parameters.
Liquidation
Borrowers are susceptible to liquidation when their loan-to-value (LTV) ratios fall below the required maintenance margin, which happens when their collateral decreases in value relative to their debt. Any address can repay a fraction of a borrower’s debt (with the maximum fraction determined by the close factor) in exchange for an equivalent amount of the borrower’s collateral plus a bonus. Liquidators can choose to receive either liquidity tokens (which will be transferred from the borrower to them) or receive the underlying assets (which causes the borrower’s liquidity tokens to be burned).
Example 1:
Example 2:
LTV Ratios
To minimize risk to the protocol, different assets have different maximum loan-to-value (LTV) ratios on Mars as shown below:
Asset
Max % of collateral that can be borrowed
LTV liquidation threshold
LUNA
60%
70%
UST
75%
85%
ANC
40%
50%
Red Bank FAQs
1. How are the fees calculated in the Red Bank?
Fees are based on market demand. Mars will launch with a standard, two-slope rate model (similar to Aave or Compound). Mars’ groundbreaking dynamic rate model, which is driven by control theory, will be deployed after market dynamics fully kick in. Learn more.
2. What assets can I deposit and borrow?
The Red Bank launched with support for UST and LUNA. Additional assets that satisfy the Red Bank Asset Listing Risk Framework can be added by governance.
3. Is there a way to query all red bank borrowers?
No. To do this, you'll need to index all of the historical events/interactions with the Mars Protocol.
4. How safe are my deposits?
Mars has been audited. However, the technology powering the protocol is highly experimental and risky. Read the Mars Disclaimers for more information on the risks involved.
Last modified 1mo ago