Mint Stablecoins With Unit Protocol

Photo by Vincent Erhart on Unsplash

Unit Protocol is a decentralized borrowing platform that utilizes the Collateralized Debt Position (CDP) model.

This model allows Unit Protocol's users to mint its native stablecoin USDP from a wide variety of crypto assets.

Many crypto holders own a diversified portfolio of assets, including a variety of capitalized and under-capitalized tokens. Popular crypto assets are easily sold and borrowed, allowing for instant access to liquidity.

However, less liquid assets are difficult to sell quickly, yet they represent a significant measure of value in the crypto asset world.

Until now there has been no way to borrow liquidity for such assets, limiting their utility in DeFi applications, funding, and usability.

You can know about Unit and collateralized stablecoins from our previous articles:

• https://hackernoon.com/like-a-duck-with-ducklings-understanding-defi-lending-with-unit-protocol-ot1d379j
• https://hackernoon.com/were-unit-protocol-and-allow-us-to-introduce-ourselves
• https://hackernoon.com/crypto-loans-the-quick-and-dirty-guide-dz1j37zv
• https://hackernoon.com/collateralized-stablecoins-what-goes-on-under-our-hood-kj2c370z

Let's see how to create a CDP on Unit Protocol with LDO as collateral.

How to Create a CDP on Unit Protocol With LDO as Collateral

Start by navigating to the Unit Protocol website, unit.xyz.

1. Before interacting with the protocol you will need to accept the Terms of Service and connect your wallet in the top right corner.

2. Click on LDO in the list of assets types to load the CDP page for LDO.

3. Scroll down to the "Deposit collateral and Borrow USDP" section and enter the amount of LDO you wish to deposit and the amount of USDP you wish to borrow. Note how the liquidation price increases towards the current price of LDO as more USDP is being borrowed.

A higher utilization ratio allows users to borrow more USDP but also exposes the user to higher liquidation risk.

If the price of LDO falls below the liquidation price, and you do not add additional funds, your CDP will be subject to liquidation. Read more here.

4. Click Execute after you’ve entered an amount of LDO and USDP you're comfortable with and sign the transactions from your wallet. After the transactions have been confirmed the CDP is created and USDP will appear in your wallet.

5. If you are using Metamask you might have to add the USDP token to your token list to see your balance. Open the transaction details on Etherescan and click the USDP Stablecoin contract address.

6. Click Copy address, open up Metamask and add it as a Custom Token.

Withdraw Collateral

The amount you need to repay to withdraw your collateral will be equal to the borrowed USDP amount + stability fee for the period.

1. Visit unit.xyz and click on LDO from the list of asset types.

2. Scroll down to the "Repay USDP & Withdraw collateral" section. Enter the amount of USDP you wish to repay and click Execute. After you’ve signed the transaction from your wallet your collateral will get withdrawn as soon as the transaction has been confirmed.

As time goes on and your crypto collateral appreciates in value, you can consider repaying and making a withdrawal or take more loans. You can also acquire USDP tokens from curve finance by swapping any other stablecoin  (USDT, USDC, DAI, UST, sUSD, etc.) for it.

Or if your collateral appreciates vastly, you can withdraw part of your collateral first, and then sell it on an exchange for USDT/USDC/other stables, then swap it for USDP on curve finance and use it to repay your loan.

However, there is no fixed repayment period.

You can manage your loan as long as you want without repaying it, as long as the collateral price stays above the liquidation price. Well, that’s it for now! Thanks for reading and we hope that this guide has been useful.

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• Discord: https://discord.com/invite/7ry3GH53gm
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Sources:

• https://help.lido.fi/en/articles/5306565-a-guide-to-unit-protocol
• https://docs.unit.xyz/revmap
• https://miro.medium.com/max/1838/1*NIBC_49JalGTPM8YDVymzA.jpeg