Please review Disclaimer: Risk of Using Protocol and Terms of Service before using the Yeti Finance and/or interacting with YETI or YUSD. Yeti Finance & YETI/YUSD are not avaliable in the U.S.
The Yeti Finance protocol offers more capital efficiency than other borrowing systems (i.e. less collateral is needed for the same loan). Instead of selling your yield-bearing collateral to have liquid funds, you can deposit the collateral into Yeti Finance, borrow against the collateral to withdraw YUSD, and then repay your loan at a future date.
For example: Borrowers looking to maximize their yield and capture upside on price increases on deposited collateral can use the protocol to leverage their position up to
11 times, increasing their exposure to price changes. This is possible because YUSD can be borrowed against the collateral, sold on the open market to purchase more collateral — rinse and repeat.*
*Note: This is not a recommendation for how to use Yeti Finance. Leverage can be risky and should be used only by those with experience.
Borrowing is pretty straightforward if you understand a couple key things. Users of Yeti Finance can create a trove by depositing collateral assets and borrow our stablecoin, YUSD.
After you pay back your borrowed YUSD, you can withdraw your deposited collateral. Until then, your collateral is held in Yeti Finance as backing for the issued YUSD and a guarantee that the YUSD debt will be paid back. There is a requirement for a minimum debt of 2000 YUSD.
You can take out a loan if the "Risk-Adjusted Value" of your collateral is greater than 110% (or 1.1 times) your borrowed YUSD. The more collateral deposited, and the more safe vs. risky collateral you put in, the higher the "Risk-Adjusted Value." The ratio between collateral and debt in your trove is called your trove's "Individual Collateral Ratio" (ICR) and is displayed here:
Viewing your trove's collateral ratios on the Borrow and Dashboard Pages
If your collateral drops in price, it will cause your Risk-Adjusted Value to drop, and potentially may make your trove eligible for liquidation. Luckily, stablecoin collaterals should not drop in value as long as the component stablecoins remain pegged. So borrowing against stablecoins is a good way to avoid liquidation no matter what happens in the markets.
There are two system modes, Normal Mode and Recovery Mode. We expect the system to remain in normal mode the vast majority of the time. Recovery mode is an edge case in case of a large systemic drop in collateral value. Recovery mode happens if the Total Collateral Ratio (TCR) falls below 150%. The TCR is displayed on the Dashboard page under "System Collateral Ratio." In both Normal and Recovery Mode, you will be eligible for liquidation if your trove's collateral ratio is below 110%. But in Recovery Mode you are also eligible for liquidation if your AICR (Adjusted Individual Collateral Ratio) is less than TCR.
So if you keep your ICR above 110% and AICR above 150%, your trove can never be liquidated under normal mode or recovery mode.