How does the NCOG borrowing protocol work?

Our protocol also allows users to effortlessly borrow from the protocol as well by using its token as collateral for use anywhere in the ecosystem. Unlike peer-to-peer protocols, borrowing on NCOG requires a user to specify the desired crypto-asset; there are no terms to negotiate, maturity dates, or funding periods; borrowing is instant and predictable.

Similar to supplying an asset, each money market has a floating interest rate, set by market forces, which determines the borrowing cost for each asset.

Assets held by the protocol – represent ownership of the liquidity and are used as collateral to borrow from the protocol. Each market has a collateral factor that ranges from 0 to 1. This represents the portion of the underlying asset value that can be borrowed. Illiquid, small-cap assets have low collateral factors; they do not make good collateral, while liquid, high-cap assets have high collateral factors. The sum of the value of an account's underlying token balances multiplied by the collateral factors equals a user’s borrowing capacity.

The workflow of the NCOG borrowing protocol is similar to that of lending. However, borrowers will have to submit collateral beforehand. The amount of the loan should not exceed the value of the collateral.

Money is lent out only after determining the borrowing power of the user. This approach will protect the lender from the risk of non-payment and delays in repayment.

The borrower will have to repay the amount along with an interest amount in regular intervals. Upon the repayment of the entire amount, the withheld collateral returns to the borrower. The interest rate on NCOG is determined based on the liquidity of the market. Concerning the lending protocol, interest rates change from time to time, depending on the supply and demand of available assets. When the liquidity of the market is high, the interest rate drops. When the liquidity of the market is low, the interest rate increases.