Underworld and CoffinBox FAQ
Below are some commonly-asked questions regarding our Underworld and Coffinbox
Define: Isolated Risk Market An isolated risk market is a market in which risk is not shared collectively. Whereas platforms like Scream and Geist have to limit their accepted collaterals to a select group of tokens because risk is shared collectively on their platforms, the CoffinBox — because it uses isolated risk markets — is able to allow users to provide liquidity for any token. If one token pair goes on the CoffinBox goes bottoms up, it only affects that pair, and not the entire platform.
How Do I Lend in a Market and Earn Interest? If you add liquidity to the CoffinBox, other users can use that liquidity for flash lending, strategies, and fixed, low-gas transfers among integrated applications, like Underworld markets, and you earn interest from when they do. Want to lend now? Visit the interface using this link: soul.sh/lend
How Do I Borrow? To borrow in the Underworld, you need to add liquidity for the token that is paired with the token you want to borrow. If you want to borrow ETH, and the only token that is paired with ETH is DAI, then you have to add ETH. Want to borrow now? Visit the interface using this link: soul.sh/borrow
How Do I Create A Market? To create a market, you need to add a new pair. If you want to add, say BTC and ETH, you can do that through the UI and finding the tokens you want to pair. Although you don’t have to add liquidity to create the pair, someone will need to add liquidity to borrow from the pair. Because of the elastic interest rate, markets that are under-utilized will be less liquid, and vice-versa.
Define: Elastic Interest Rate An elastic interest rate is a means of incentivizing liquidity to hover within an ideal range (70 - 80%). The elastic interest rate optimizes for utilization (borrowed assets / total assets). If the utilization is below the minimum target utilization, the interest rate halves every 8 hours. It is capped at a minimum utilization. If the utilization goes above the maximum target utilization, the interest rate doubles every eight hours. At 100%, utilization it doubles every 8 hours. At 90% it's much slower, and at 80% it's stable. Below 70%, it starts dropping, and at 0% it drops by halving every 8 hours. That is, the elastic interest rate is not linear. Rather, the closer utilization gets to the extremes, the faster it goes.