TLDR:

If you plan your EOSDT loan wisely and pay it back, you would pay an interest rate much lower than from a bank loan or other DeFi services, and you would keep your cryptocurrency while accessing new capital. The key to success is to avoid liquidation, in which you would lose the cryptocurrency securing your loan and pay a penalty. You also have to buy a separate token for the 1% admin fee. Steps for the whole borrowing process are laid out.

Key Concepts

What are Equilibrium and EOSDT?

Equilibrium is a set of smart contracts that enables you to borrow stablecoins pegged to the US Dollar by locking up the cryptocurrency EOS to secure the loan. The stablecoin generated is called EOSDT, which can be exchanged for a variety of other currencies. 1 EOSDT = $1 US Dollar.

Link to EOSDT FAQ.

What are the important terms to know when borrowing EOSDT?

Collateral: asset that a borrower offers to secure a loan, which is held until the loan is paid back. If the borrower does not comply with the loan terms before payback, the lender can take control of the collateral asset. In our case, the loan terms are programmed into smart contracts and EOS serves as the collateral to generate an EOSDT loan.

Collateralization Ratio: the collateral you offer, divided by the value of your loan. Ex. $2,600 EOS collateral / $1,000 loan = 260% Collateralization Ratio.

Collateralization Ratio = EOS collateral value / EOSDT loan value

Important note: since the price of EOS changes based on market supply & demand, your EOS collateral value and Collateralization Ratio will change with EOS price fluctuations.

Important note: since the price of EOS changes based on market supply & demand, your EOS collateral value and Collateralization Ratio will change with EOS price fluctuations. Collateralization Requirement: the minimum Collateralization Ratio you may have. If it falls below this number, your collateral would be automatically seized. When borrowing, you want a Collateralization Ratio much higher than this requirement because you do not want to lose your collateral due to EOS price fluctuations.

130%

Liquidation: if your Collateralization Ratio falls below 130%, the collateral would be seized. In our case, the smart contract system would seize your EOS collateral in an amount equivalent to your loan value , plus a penalty.

, plus a penalty. Liquidation Penalty: penalty you would pay from collateral if your position is liquidated.

15% of your loan value

Admin Fee: annual fee paid to maintain operations, payable in EOSDT. Since this is the only required fee for the platform, it is the effective interest rate on your loan.

1% per year

Equilibrium Fee: EOSDT charged every time a user takes an action

0% per year

What do you need to get started?

A. Capital: fiat currency or cryptocurrency

B. Computer with Internet access

C. Hardware wallet (optional, for more security)

Overview of Steps to Borrow EOSDT

Plan the numbers Buy EOS Download the wallet app and if you don’t have one, create an EOS account Generate EOSDT Optional: Exchange EOSDT for crypto or fiat Pay back loan & pay admin fee

Detailed Steps to Borrow EOSDT

1) Plan the numbers

Loan Amount

Decide how much EOSDT you want to borrow based on your needs and purpose.

Ex. 1,000 EOSDT, which equals $1,000 USD

Collateralization Ratio

As discussed above, you as a borrower agree to maintain a minimum Collateralization Ratio of 130%. Since your loan’s Collateralization Ratio will vary with changes in the price of EOS, the more EOS you offer as collateral, the lower the chance it would reach this 130% rate and be liquidated. A higher Collateralization Ratio means more protection from losing your collateral.

Ex. $1,300 of EOS collateral / $1,000 loan = 130% Collateralization Ratio— the required minimum

Ex. $2,600 of EOS collateral / $1,000 loan = 260% Collateralization Ratio

How might the Collateralization Ratio change with EOS price changes?

If 1 EOS = $3.00 USD, your $2,600 collateral is equal to 867 EOS. If the price of 1 EOS drops to $2.00, your collateral value drops to $1,733 and your Collateralization Ratio reduces to $1,733/$1,000 = 173%. Because of this dynamic, you need to decide on the next item, Liquidation Price.

Liquidation Price

This is the EOS price below which your position would automatically be liquidated because it dropped below the 130% Collateralization Requirement. If this happens, a smart contract would transfer the EOS collateral out of your position, equal to your loan value plus the 15% Liquidation Penalty. You could prevent this from happening by choosing a Liquidation Price that is much lower than the current market price of EOS. The Liquidation Price you choose would be based on your own judgment, the volatility of EOS, and your risk tolerance.

Ex. If the current price of EOS is $3.00, you may want to set $1.50 as your liquidation price.

Collateral

How much EOS you would need to offer to secure and take out your loan, based on the above criteria.

Collateral = Loan Amount x Collateralization Requirement / Liquidation price

Ex. $1,000 x 130% / $1.50 = $2,600 or 867 EOS

NUT (Native Utility Token)

NUT is a separate token that can vote on Equilibrium platform changes, vote on block producers, and receive block producer rewards when it is staked. NUT may also be used to buy liquidated EOS at a discount (details on staking rewards here). Purchasing NUT supports the Equilibrium system, is optional, and is not required for this process.

2) Buy EOS

Decide which exchange you want to use (click here for a list of EOS markets), and purchase the EOS amount you calculated for collateral above, plus a few additional EOS to create your account and to stake (in case network resources are low; see #3 below). For heightened security, store your EOS on a hardware wallet that can interface with Scatter wallet’s software (ex. EOS guide for Ledger Nano S).

3) Download the wallet app, and if you don’t have one, create an EOS account

Download the Scatter desktop wallet: https://get-scatter.com/. Scatter is used to interface with the EOSDT Gateway.

Create an EOS account (a unique 12-character name).

Note: You will need to send a small amount of EOS (~1 EOS as of this writing) to create your account on the EOS blockchain. You can send this from the exchange where you bought EOS. Make sure you include the memo per Scatter wallet’s instructions to ensure successful account creation.

Note: Always use your “active” key for transferring funds; your “owner” key is meant only as a master key to overwrite itself or to overwrite active keys.

Note: You will need to send a small amount of EOS (~1 EOS as of this writing) to create your account on the EOS blockchain. You can send this from the exchange where you bought EOS. Make sure you include the memo per Scatter wallet’s instructions to ensure successful account creation. Note: Always use your “active” key for transferring funds; your “owner” key is meant only as a master key to overwrite itself or to overwrite active keys. Transfer the EOS from your exchange account to your Scatter or hardware wallet. You may want to test a small transfer to make sure it is successful before sending the remainder of your balance.

Network Resources: EOS transactions are free. However, the EOS network functions using resources called CPU, NET, and RAM. Each EOS token represents a small portion of the available resources on the EOS network. Each time you act on the EOS blockchain, you need to have sufficient resources available (which vary based on overall network activity), and Scatter will display available resources as percentages on your account page. When you create your EOS account, a small portion of your account payment will automatically be staked to support these resources.

However, your account may have insufficient resources due to network activity, which would prevent you from making transactions. If you need more CPU or NET to make transactions, you can stake additional EOS to these resources via the Scatter wallet. A more efficient method may be to borrow CPU or NET through the EOS Authority REX site: first deposit EOS into the REX fund (0.05 EOS was enough as of this writing), then book a CPU or NET loan with that amount.

4) Generate EOSDT

Go to https://equilibrium.io/eosdt/. Click the button to link your Scatter wallet (be sure to select your active key, not your owner key). On your position page, enter the amount of EOS you want to pledge and amount of EOSDT to generate. Before confirming, check the displayed collateralization ratio and liquidation price to confirm these are satisfactory and match your plan.

Optional: Buy NUT to stake for rewards and platform voting. On the EOSDT Gateway page, at the bottom-right, click “Buy NUT”. A bubble will appear with various DEX’s (decentralized exchanges).

As of this writing, Newdex appears to have reasonable liquidity for NUT (note that Newdex may not load through a VPN connection). NUT is also available through Bancorp and HitBTC (unavailable in USA).

5) Optional: Exchange EOSDT for crypto or fiat

A. Traditional exchanges that support EOSDT are listed at https://coinmarketcap.com/currencies/eosdt/#markets. HitBTC (unavailable to US users) was the only traditional exchange available as of this writing.

B. Some decentralized exchanges can trade your EOSDT for EOS, which could then be traded for other crypto or fiat. Choose a DEX with sufficient liquidity, reasonable fees, and low/zero price slippage (value lost due to limited supply).

DEX Options:

Newdex (may not load through a VPN connection)

Bloks.io — low liquidity as of this writing

DEXEOS — low liquidity as of this writing

YOLO and Bancorp — as of this writing, these had significant price slippage

If you exchange EOSDT for EOS, you can transfer the EOS to your exchange of choice to convert it to other crypto or fiat (via Coinbase Pro, Kraken, etc.). List of EOS markets.

6) Pay back loan & pay admin fee

Start this phase when you are ready to repay your loan. Secure the EOSDT needed to pay back your EOSDT loan. If you previously exchanged your EOSDT to another currency, you can

a) Buy EOSDT through the traditional or decentralized markets listed above, or

b) Buy EOS, then convert it to EOSDT through a DEX listed above (send the EOS to your Scatter wallet before using a DEX)

a) Buy EOSDT through the traditional or decentralized markets listed above, or b) Buy EOS, then convert it to EOSDT through a DEX listed above (send the EOS to your Scatter wallet before using a DEX) Ensure you have enough EOSDT in your Scatter wallet to repay your loan and admin fee. The current fee you owe will be displayed on your position page, found via the EOSDT Gateway and clicking on your position.

Pay back your EOSDT loan and admin fee. Click the ‘Payback’ tab and pay back all of the EOSDT generated plus fees.

Conclusion

If you followed the above steps, you have successfully used the EOSDT platform for DeFi borrowing with significant cost savings compared to other DeFi platforms at this time. Please comment with your thoughts and share what your experience with Equilibrium and EOSDT was like.

For detailed information on the EOSDT project, please see the Equilibrium Knowledge Base.