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5. Borrowing Tokens from Donkey
To borrow tokens from Donkey, you must first make deposits in Donkey. As of now, deposits recognized as collateral are USDT, ETH, and WBTC.
For example, if you deposited 100 million won worth of USDT and 500 million won worth of OMG, ELF, and HUNT altogether, the value of your assets recognized as collateral in order to borrow from Donkey will only be 100 million won in USDT. We plan to consecutively add the remaining as collateral through governance voting in the future.
Now, let's assume that you have USDT, ETH, or WBTC deposited, to walk you through how to get a loan from Donkey.
After logging in to Donkey, check out the list of Available to Borrow.
Of these, let’s select WBTC. Click the blue Borrow button next to WBTC.
You will be able to see the amount of remaining loan that you can receive. Adjust the bar to select what percentage of it you intend to receive a loan for. You can choose up to 95% of your remaining loan limit. You can also click the Maximum button on top where the 95% will automatically be entered.
There may be those who want maximum leverage as possible. You may type into the input box a range between 95% and 100%. It is upon the user’s discretion to personally manage their own financial risks.
Please try to keep your ratio of loan to remaining loan limit not too high. The higher it is, the higher the liquidation risk. Please check out this article about liquidation risks.
When you take out a loan, interest of course has to be paid. Then why would the expense be a minus figure? This means simply getting a loan results in a profit. Negative interest is being accrued. Technically speaking, if you borrow WBTC, the interest for borrowing it will in fact continue to be an expense. Donkey rewards the borrower with DON tokens in the same way as the depositor.
If you calculate the current DON token price in Korean won, taking out a loan will result in 242.01% annualized profit as the value of the DON token reward is higher than the interest expense for borrowing WBTC. Since this interest rate is calculated based on rewards offered throughout the year in the current DON token price, it may vary from the actual interest rate after one year.
Lastly, please read the disclaimer thoroughly before you click the checkbox, and then click Borrow. Once the wallet is running, approve the transaction. If you wait from 30 seconds to 10-20 minutes at most, your transaction will be approved on the Ethereum network.
Not having enough gas fees can delay the transaction approval. Please check out our Frequently Asked Questions about approval delays due to low gas fees.
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