Thread: The Dangers of Margin Lending
Button Zero uses Uniswap v3 like an order book.
Thread: Button Zero is not a liquidity pool, even though it routes through Uniswap v3
The range accounts for the slippage users incur with an increase in size. Lower liquidity can result in wider ranges and greater slippage. To avoid slippage, users can place 'Ask' Orders.
Users can place bid/ask (limit) orders by depositing liquidity at a certain price.
Yes, we created a rebasing wrapper for non-rebasing assets like ETH & BTC that have robust oracles for them to rebase to a dollar. It simplifies a number of issues.
Discount Rate = (Face Value - Purchase Price) * 100
Discount on Button Zero = ($1.00 - Purchase Price)
Yield (%) = (Face Value - Purchase Price) / (Purchase Price) * 100
Yield on Button Zero (%) = ($1.00 - Purchase Price) / Purchase Price
The collateralization (%) changes based on the price movements of the collateral asset backing that tranche. It is higher for A-Tranche tokens than B-Tranche tokens because the A-Tranche is paid out first.
The collateralization (%) only matters upon maturity of the bond, as it determines how much each tranche token can be redeemed for. If it is above 100% upon maturity, tokens for that tranche (A,B) are worth $1.00.
A fixed interest rate is an unchanging rate charged on a liability, such as a loan or mortgage. In the ButtonZero lending platform, it means that the user locks in their interest rate when they borrow or lend. This differs from existing margin lending platforms like Compound or Aave, where the interest rate changes continuously and a user must accept whatever rate occurs.
In DeFi margin-lending platforms, users take out debt from a protocol and provide crypto assets as collateral to back the debt. However, if the debt value starts getting close to eclipsing the collateral's value, the smart contract will automatically allow third parties to bid on the collateral to cover the debt that is outstanding to the DeFi protocol. Thus, DeFi liquidation is the process by which a smart contract sells crypto assets to cover the debt. Users of ButtonZero do not need to worry about this as the protocol was designed to have zero-liquidations which benefits borrowers.
A portion of something. In this context, it means to split an asset into different levels of risk. Some tranches will represent a safe portion of the underlying asset, while other tranches will represent a riskier portion of the asset.
These define the way that risk is transferred from more senior tranches to more junior tranches. They are generally denoted in terms of percent, i.e. a '20/30/50' bond represents a 20% A-Tranche, 30% B-Tranche and 50% Z-Tranche. This in turn means that the A-tranche holders are entitled to the first 20% of the value. After the A-Tranche has been made whole, the B-Tranche holders receive the next 30%, with the remainder going to the Z-Tranche holders.
Senior Tranche Claim
Senior claims are the most safe as they are paid back first. In return for this extra safety, they have limited upside -- usually only an interest rate on top of their original investment.
Junior Tranche Claim
Junior claims are riskier than senior claims as they are paid back last. In return for this extra risk, they have a much higher upside. In the case of Button Tranche, they receive exclusive exposure to all of the collateral's upside.
A zero-coupon bond, also known as an accrual bond, is a debt security that does not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.
The borrower of a bond can also be referred to as the Bond Seller, the Bond Issuer, or the Debtor.
The lender of a bond can also be referred to as the Bond Buyer, the Bond Holder, and the Creditor.
The asset backing the bond. Its volatility generates the risk that senior tranche holders transfer to junior tranche holders.
These bonds mature at a certain date, after which the collateral asset is distributed among the borrowers and lenders.