There should be a time limit for Borrow to pay back the borrowed amount , it would help to replenish the cauldrons and improve cycle time for the Lend .
What do you think ?
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Like, liquidate people who don’t pay the loan back on time? I feel like crypto can be unforgiving enough. I believe the infrequent replenishes are due to current minted and mintable MiM being utilized in projects like the UST/MiM Terra strategy and the BSC Degen Box strategy. (only 10% of the total supply can be minted in a day according to the Spell AMA on Frog Radio)
In the long term I believe it will benefit spell holders more to let the token grow in number and stature across as many chains as possible than to liquidate people with a borrow duration.
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I think that a better solution might be to tweak the interest rates up just slightly on some types of cauldrons (not the same cauldron as already operating, because those conditions are fixed… but could duplicate with another cauldron with slightly different conditions) where there is high demand. This will 1) stimulate more frequent repayment, 2) drive more revenue. Of course, you really don’t want to overshoot, and I would also caution that borrowing feels easy right now in the current market but that’s because yields are historically high over the past couple of months… if stablecoin yields drop again as part of the next cycle then we don’t want our interest rates to be getting as close to as high as yields…
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The only way I see this really working would be if there were a trade-off benefit to taking out a fixed-term loan vs an overcollateralized loan in perpetuity. One example could be a scenario where fixed-term loans received discounts on interest rates or borrow fees. But to be honest, at the current rates, it’s hard to see that being too much of a value add since interest rates are already relatively low. Otherwise, an alternative strategy would be to open fixed-term cauldrons that allow for unique collateral types which aren’t available for non-fixed term borrows. Could be an interesting way to adjust for risk on more volatile assets by limiting loans against the assets to a short window (theoretically reducing long term tail risk exposure for the cauldron). But just spitballing.
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My opinion is that this is a non issue. Curious to what others might think!
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The great development in crypto has been the low interest loans together with not having to pay interest or montly payments. Along with good timing and risk management, the assets could grow during the borrowing period.
The problem with time limit is the volatile nature of crypto. Even with good risk management and not getting liquidated, you could find yourself in a position when the time limit is about to expire and your asset has dropped 40% in value. Instead of waiting until the asset has gained higher dollar value, you then have to repay the loan due to the time limit. All of the sudden you find yourself in the position with a collateral worth 60% of the original value, and if you want leverage up again you end up with borrowing 40-50% of the now 60% worth of collateral.
In other words will a time limit frequently force people to liquidate/reduce their buying power, get less yield or get the exposure to other asset greatly reduced, even though the value reduction of the collateral still might maintain a relativly healthy LTV ratio.
I’m sorry if my response is formulated somewhat complicated. I’m not a native english speaker:)
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