Borrowing

Borrowing in V$ (Vow Dollars) is a decentralized tool allowing users to access digital currency loans by leveraging their VOW tokens as collateral.

Decentralized Borrowing of V$

Borrowing in V$ (Vow Dollars) is a decentralized tool allowing users to access digital currency loans by leveraging their VOW tokens as collateral. This system operates trustlessly through smart contracts, enabling borrowers to access v$ loans without intermediaries, while offering clear repayment terms and collateralized positions.

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How Decentralized Borrowing of V$ Works

1. Borrower Deposits Collateral:

   • The borrower locks VOW tokens into a smart contract as collateral.

   • The collateral's value must equal the loan amount requested plus 18% annual cost in USD equivalent.

   • EXAMPLE : If you wish to borrow v$1000 you must lock $1180 USD worth of VOW.

2. Loan Issuance:

   • The borrower receives the loan in V$, a free floating digital currency, which can be used for various purposes within, or outside, the ecosystem.

3. Loan Terms:

   • Repayment Period: 372 days, divided into 12 periods of 31 days.

   • Interest Rate: Borrowers pay 1.5% per 31-day period.

   • Advanced Payment: The reason for collateralising an additional 18% in VOW at the commencement of a loan is that it collateralises the cost of 1.5% for 12 periods.

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Repayment Options for Borrowers

1. Timely Repayment:

   • Borrowers can repay the V$ loan and accrued interest at any time within the 372-day period.

   • Once repaid:

     • The collateralised (within 372 days) VOW tokens are released back to the borrower.

     • The loan is considered settled.

2. Default Scenario:

   • If the borrower fails to repay the loan by the end of 372 days, the loan will keep running.

   • 18% of the initial loan value is instantly claimed by the lender from the collateral for another 372 day period.

   • If the remaining collateral is still worth more than 50% of the loan value there is no change. The loan keeps running until repaid.

   • If the collateral value falls below 50% of the original loan value the lender has the right to force liquidate the position and claim all remaining VOW collateral.

   • If the VOW collateral value is higher than the USD value of the original loan, the loan keeps running until the v$ are re-paid.

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Borrowing Example

• Borrower A locks 1,180 USD worth of VOW tokens as collateral to borrow 1,000 V$ (plus the lenders 18% interest up front)

1. If Repaid:

   • Borrower repays the loan principal (1,000 V$) plus interest (e.g., 18% over 12 periods = 1,180 V$ total).

   • Because borrower has already advance paid the 18% interest up front at inception of the loan they only need to repay v$1000 to the contract.

   • Collateral (VOW tokens) is fully released to the borrower.

2. If Defaulted:

• If the borrower fails to repay the loan by the end of 372 days, the loan will keep running.

• 18% of the initial loan value is instantly claimed by the lender from the collateral for another 372 day period.

• If the remaining collateral is still worth more than 50% of the loan value there is no change. The loan keeps running until repaid.

• If the collateral value falls below 50% of the original loan value the lender has the right to force liquidate the position and claim all remaining VOW collateral.

• If the VOW collateral value is higher than the USD value of the original loan, the loan keeps running until the v$ are re-paid.

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Advantages of Decentralized Borrowing in V$

1. Access to v$:

   • Borrowers receive V$, a digital currency, ideal for use within the ecosystem.

2. Collateral Protection:

   • Borrowers retain ownership of their VOW collateral unless they default, allowing them to leverage crypto assets without selling them.

3. Flexible Repayment:

   • Borrowers can repay in full within the term, reducing overall interest costs.

4. Decentralized Automation:

   • Smart contracts manage the entire borrowing process, eliminating the need for intermediaries and ensuring transparency.

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Risks for Borrowers

1. Collateral Volatility:

   • The value of VOW tokens can fluctuate or be reduced.

   • v$ can also fluctuate or be reduced in value.

2. Default Penalties:

   • Failure to repay results in the forfeiture of collateral, up to the value of the loan plus 18% default fee.

3. Interest Accumulation:

   • If payments are delayed, interest compounds, increasing the repayment obligation.

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Use Cases for Borrowing V$

1. Liquidity Needs:

   • Access v$ without selling VOW tokens, preserving exposure to potential asset appreciation.

2. Participation in DeFi:

   • Borrowed V$ can be used for staking, yield farming, or other decentralized finance activities.

3. Real-World Spending:

   • V$ can be sold to USDC for traditional expenses or used within integrated business ecosystems.

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Comparison to Traditional Loans

Aspect	Decentralized V$ Borrowing	Traditional Loans
Collateral	VOW tokens, crypto-based	Real estate, cash, or creditworthiness
Repayment Terms	Flexible within 372 days	Fixed terms, often rigid
Intermediaries	None (managed by smart contracts)	Banks or financial institutions
Approval Process	Instant (collateral-based)	Lengthy (credit checks, documentation)

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Conclusion

Decentralized borrowing in V$ provides an efficient, and flexible way for users to access digital currency loans without selling their VOW tokens. This system enables borrowers to maintain exposure to their crypto assets while meeting liquidity needs. However, borrowers must manage risks, including interest costs and collateral volatility, to maximize the benefits of this innovative lending model.