{"id":3165,"date":"2024-09-12T04:59:08","date_gmt":"2024-09-12T04:59:08","guid":{"rendered":"https:\/\/usecyan.com\/articles\/?p=3165"},"modified":"2024-09-12T04:59:12","modified_gmt":"2024-09-12T04:59:12","slug":"introducing-automatic-liquidation-loans","status":"publish","type":"post","link":"https:\/\/usecyan.com\/articles\/introducing-automatic-liquidation-loans\/","title":{"rendered":"Introducing Automatic Liquidation Loans"},"content":{"rendered":"\n<div class=\"wp-block-rank-math-toc-block\" id=\"rank-math-toc\" id=\"rank-math-toc\"><h2>Table of Contents<\/h2><nav><ul><li ><a href=\"#how-to-turn-on-auto-liquidation-as-a-borrower\">How to turn on Auto-Liquidation as a borrower<\/a><\/li><li ><a href=\"#how-to-stake-into-the-auto-liquidation-vault-as-a-lender\">How to stake into the Auto-Liquidation vault as a lender<\/a><\/li><li ><a href=\"#pros-and-cons-of-auto-liquidating-loans\">Pros and Cons of Auto-Liquidating Loans<\/a><ul><li ><a href=\"#straight-loan\">Straight Loan<\/a><\/li><li ><a href=\"#auto-liquidation-loan\">Auto-liquidation Loan<\/a><\/li><\/ul><\/li><li ><a href=\"#in-summary\">In Summary<\/a><\/li><\/ul><\/nav><\/div>\n\n\n\n<p>Cyan has always aimed to offer borrower-friendly solutions, pioneering the first peer-to-pool protocol that avoids liquidating loans based on NFT spot price. Instead, our vaults only observe monthly repayments as a default event, ensuring that as long as borrowers make their payments on time, their loan remains active regardless of NFT price fluctuations. This structure provides significant peace of mind, allowing borrowers to keep their assets safe as they continue to make payments.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img data-dominant-color=\"58d2cf\" data-has-transparency=\"true\" style=\"--dominant-color: #58d2cf;\" loading=\"lazy\" decoding=\"async\" width=\"960\" height=\"540\" src=\"https:\/\/usecyan.com\/articles\/wp-content\/uploads\/2024\/09\/auto-liqudiations.png\" alt=\"\" class=\"has-transparency wp-image-3260\" srcset=\"https:\/\/usecyan.com\/articles\/wp-content\/uploads\/2024\/09\/auto-liqudiations.png 960w, https:\/\/usecyan.com\/articles\/wp-content\/uploads\/2024\/09\/auto-liqudiations-300x169.png 300w, https:\/\/usecyan.com\/articles\/wp-content\/uploads\/2024\/09\/auto-liqudiations-768x432.png 768w\" sizes=\"(max-width: 960px) 100vw, 960px\" \/><\/figure>\n\n\n\n<p>However, as the protocol evolves, we are committed to offering greater flexibility for both borrowers and lenders. With rising demand for lower interest rates, Cyan developed auto-liquidation vaults to meet the needs of those seeking loans with more lenient terms. These new loans include NFT price observation, meaning that if the NFT&#8217;s price drops too low, it may trigger an automatic default. Nonetheless, we will continue to offer loans without price observation, giving users the option to choose the mechanism that best suits their preferences.<\/p>\n\n\n\n<p>Borrowers now have the ability to select the type of default mechanic that aligns with their risk tolerance and financial goals. Auto-liquidation loans offer significantly reduced interest rates, making them ideal for short-term borrowing or trying out new NFT collections. Despite the lower rates, borrowers still retain the full utility of their NFTs during the loan period.<\/p>\n\n\n\n<p>Lenders also benefit from the auto-liquidation option, as it offers them the opportunity to earn a yield on NFT loans with added principal protection. Since NFTs are volatile and illiquid assets, an automatic default process ensures the principal is protected by selling the NFT if its price nears the loan amount. Unlike other platforms that rely on auctions, Cyan&#8217;s innovative oracle system ensures a fair market observation, taking into account the liquidity and bid depth of the NFT collection to safeguard both parties.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"how-to-turn-on-auto-liquidation-as-a-borrower\">How to turn on Auto-Liquidation as a borrower<\/h2>\n\n\n\n<p>Enabling auto-liquidation when starting a loan is straightforward. Simply toggle the &#8220;Auto-liquidations&#8221; switch to on, and you&#8217;ll be able to compare the interest rates between straight loans and auto-liquidation loans.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img data-dominant-color=\"204550\" data-has-transparency=\"true\" style=\"--dominant-color: #204550;\" loading=\"lazy\" decoding=\"async\" width=\"768\" height=\"1024\" src=\"https:\/\/usecyan.com\/articles\/wp-content\/uploads\/2024\/09\/autoliq_compressed-768x1024.png\" alt=\"auto liquidation toggle\" class=\"has-transparency wp-image-3258\" srcset=\"https:\/\/usecyan.com\/articles\/wp-content\/uploads\/2024\/09\/autoliq_compressed-768x1024.png 768w, https:\/\/usecyan.com\/articles\/wp-content\/uploads\/2024\/09\/autoliq_compressed-225x300.png 225w, https:\/\/usecyan.com\/articles\/wp-content\/uploads\/2024\/09\/autoliq_compressed-1152x1536.png 1152w, https:\/\/usecyan.com\/articles\/wp-content\/uploads\/2024\/09\/autoliq_compressed.png 1536w\" sizes=\"(max-width: 768px) 100vw, 768px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"how-to-stake-into-the-auto-liquidation-vault-as-a-lender\">How to stake into the Auto-Liquidation vault as a lender<\/h2>\n\n\n\n<p>To stake into vaults that support this feature and earn yield, head to the <a href=\"https:\/\/usecyan.com\/vault\">Lend<\/a> page on Cyan and select an Auto-Liquidation vault. You can then choose how much ETH, USDC, or another native currency to stake.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img data-dominant-color=\"234153\" data-has-transparency=\"false\" style=\"--dominant-color: #234153;\" loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"692\" src=\"https:\/\/usecyan.com\/articles\/wp-content\/uploads\/2024\/09\/staking-1024x692.png\" alt=\"\" class=\"not-transparent wp-image-3259\" srcset=\"https:\/\/usecyan.com\/articles\/wp-content\/uploads\/2024\/09\/staking-1024x692.png 1024w, https:\/\/usecyan.com\/articles\/wp-content\/uploads\/2024\/09\/staking-300x203.png 300w, https:\/\/usecyan.com\/articles\/wp-content\/uploads\/2024\/09\/staking-768x519.png 768w, https:\/\/usecyan.com\/articles\/wp-content\/uploads\/2024\/09\/staking-1536x1039.png 1536w, https:\/\/usecyan.com\/articles\/wp-content\/uploads\/2024\/09\/staking-2048x1385.png 2048w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"pros-and-cons-of-auto-liquidating-loans\">Pros and Cons of Auto-Liquidating Loans<\/h2>\n\n\n\n<p>When choosing a loan type, it&#8217;s important to understand the trade-offs between straight loans and auto-liquidation loans, especially in the context of NFT financing. Each option offers distinct advantages and disadvantages depending on factors like interest rates, repayment flexibility, and the impact of price fluctuations on the underlying asset. Below, we explore the key pros and cons of these two loan types to help borrowers make informed decisions based on their needs and risk tolerance.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"straight-loan\">Straight Loan<\/h3>\n\n\n\n<p><strong>Pros:<\/strong><\/p>\n\n\n\n<ul>\n<li>The asset price can be ignored during the loan period, meaning price fluctuations of the NFT don\u2019t affect the loan.<\/li>\n<\/ul>\n\n\n\n<p><strong>Cons:<\/strong><\/p>\n\n\n\n<ul>\n<li>Higher interest rates compared to other loans.<\/li>\n\n\n\n<li>While early repayment in short-term bullet loans may receive a discount, longer-term loans only offer minimal interest discounts on early repayment.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"auto-liquidation-loan\">Auto-liquidation Loan<\/h3>\n\n\n\n<p><strong>Pros:<\/strong><\/p>\n\n\n\n<ul>\n<li>Significantly lower interest rates, making it ideal for shorter loans where quick liquidity is needed.<\/li>\n<\/ul>\n\n\n\n<p><strong>Cons:<\/strong><\/p>\n\n\n\n<ul>\n<li>The loan is tied to the asset\u2019s price in real-time. If the NFT&#8217;s value drops to the Loan-to-Value (LTV) ratio, the loan defaults and the NFT is automatically liquidated.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"in-summary\">In Summary<\/h2>\n\n\n\n<p>Cyan&#8217;s innovative loan structures, including both straight and auto-liquidation loans, provide borrowers and lenders with flexible and tailored options to meet their financial goals. Borrowers can choose the loan type that best suits their risk tolerance, balancing lower interest rates with potential liquidation risk or opting for a safer route with a slightly higher cost. For lenders, the auto-liquidation vaults offer an attractive way to earn yields while minimizing risk through principal protection. As the NFT lending space evolves, Cyan continues to lead the way by creating solutions that benefit both sides of the market, ensuring fairness, security, and accessibility for all participants.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Cyan offers borrower-friendly solutions with two loan types: straight loans and auto-liquidation loans. Straight loans avoid liquidations based on NFT price, ensuring stability but with higher interest rates. Auto-liquidation loans feature lower rates tied to real-time NFT value, risking automatic liquidation if prices drop. Borrowers and lenders benefit from flexible options tailored to their financial goals and risk tolerance.<\/p>\n","protected":false},"author":2,"featured_media":3260,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[66],"tags":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/usecyan.com\/articles\/wp-content\/uploads\/2024\/09\/auto-liqudiations.png","amp_enabled":true,"_links":{"self":[{"href":"https:\/\/usecyan.com\/articles\/wp-json\/wp\/v2\/posts\/3165"}],"collection":[{"href":"https:\/\/usecyan.com\/articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/usecyan.com\/articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/usecyan.com\/articles\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/usecyan.com\/articles\/wp-json\/wp\/v2\/comments?post=3165"}],"version-history":[{"count":3,"href":"https:\/\/usecyan.com\/articles\/wp-json\/wp\/v2\/posts\/3165\/revisions"}],"predecessor-version":[{"id":3261,"href":"https:\/\/usecyan.com\/articles\/wp-json\/wp\/v2\/posts\/3165\/revisions\/3261"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/usecyan.com\/articles\/wp-json\/wp\/v2\/media\/3260"}],"wp:attachment":[{"href":"https:\/\/usecyan.com\/articles\/wp-json\/wp\/v2\/media?parent=3165"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/usecyan.com\/articles\/wp-json\/wp\/v2\/categories?post=3165"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/usecyan.com\/articles\/wp-json\/wp\/v2\/tags?post=3165"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}