Credit Facility

Baseline Lending

Baseline has a decentralized lending facility that allows token holders to borrow assets by using their Baseline tokens as collateral. Since Baseline guarantees an intrinsic value for each token, the protocol allows holders to borrow this value at a high loan-to-backing value, for a small fee, and no risk of liquidation.

The credit facility differentiates itself in a few ways from established lending markets:

• Peer-to-lender - users borrow directly from the protocol using protocol-owned reserves. The borrower does not have to rely on external third-party lenders who may pull liquidity during market stress.
• Isolated risk architecture - unlike other lending markets that socialize borrower risk through shared pool architecture , Baseline keeps each loan separate.
• No interest rates - loans are not charged interest, but rather a one-time origination fee at the time of opening or extending a position
• No liquidations - since every token is backed by reserves at the floor price value, the protocol doesn't need to manage a liquidation engine, meaning the protocol doesn't seize borrowers' assets. In the event of a default (due to expiry), the protocol simply burns the collateral, reducing the circulating supply and reserves at a ratio that grows the intrinsic value
• Fixed duration - instead of price-based liquidations, loans have a fixed duration
• No oracles - as there is no liquidations, the credit facility doesn't require any oracles to function, making it simpler and more reliable.

Loan Terms and Conditions

• Loans are extended in $ETH against Baseline token collateral
• Loan duration is denoted in days, can be any number of days, and expire at beginning of next full day
• There is a .01095% per diem, one-time, fee for opening a loan. Loans can be extended for the same fee
• The loan-to-backing ratio is 100%
• A user can only have one loan at a time

Interactions

• Opening a loan: To use the credit facility, the user deposits token into Lending.sol, and receives reserves in return. The borrow fee is taken from the received reserves. Keep in mind that the user cannot open a new loan if they have an existing loan.
• Repaying a loan: A user can repay loan any time by depositing reserves into Lending.sol, and receiving proportional share of collateral back. A user can partially repay the loan.
• Rolling a loan: A user can roll a loan if it's not expired by interacting with Lending.sol. If the floor price has gone up since last borrow, rolling a loan will allow you to take the net reserves out, with fee taken on those reserves.
• Defaulting on Loans: The protocol automatically defaults all expired loans at end of day. Instead, the user repays within some timeframe, or defaults. Upon default, while the protocol's reserves shrink, the seized collateral exceeds the borrowed backing, thereby realizing a profit for the protocol.

Use Cases

The borrowed assets may be used in any way the user desires:

• Borrow and rebuy token to create a highly capital efficient leveraged position
• Borrow and stake reserve into yielding facility (e.g. borrow ETH and stake into stETH)
• Borrow and LP in Baseline pool, creating a fee generating liquidity position that can also be used to DCA in