Hedge
Hedge offers 0% interest loans on Solana in form of our CDP stablecoin $USH with the lowest collateral ratios available on Solana
How Hedge Works
Hedge is a protocol that enables the minting of USH, a stablecoin soft-pegged to the US dollar. USH is minted on flexible terms and gives users instant access to the USH ecosystem.
Hedge allows users to take out 0% interest loans for a one-time fee by depositing collateral for USH. Users are incentivized to keep their collateral-to-debt ratio above 110% to avoid liquidation. When an undercollateralized vault is liquidated, users who have deposited USH in a stability pool are returned discounted collateral as a reward. USH is always redeemable for its underlying value, but a fee ensures the protocol is impacted infrequently.
Hedge is a protocol that aims to offer:
- The best lending rates possible: our initial offering is a 0% interest vault
- Maximum loan-to-value as high as 90.9%
- Low minimum loan amounts close to $200
- Loans with a one-time small setup fee and 0% interest so users can repay the loan on their own sch
Creating a vault
You can create a vault in a few clicks. Start by heading to the Borrow section of the Hedge website, then click Deposit Collateral. From there, you’ll see the option to select your vault type. Currently, the following vault type is supported:
SOL-110: A vault with a 110% minimum collateral ratio and a 0.5% loan initiation fee. Note that the vault may be liquidated under 150% collateral ratio in exceptional circumstances
Taking out a loan
Now, you’re ready to take out a loan. Keep in mind that there is a minimum of 100 USH debt and a 0.5% fee is assessed when the loan is taken out. You can repay the loan at any time. Partial repayments are possible as long as your final loan balance is above 100 USH; otherwise, the full amount of the debt must be repaid.
Inside the vault, you can deposit more SOL or withdraw it. You can only withdraw SOL as long as you maintain the minimum collateral to debt ratio for the vault.
Stability pool and liquidating a vault
You can deposit USH in the stability pool and receive profits from liquidated vaults, where the profit is denominated in the collateral. In the liquidation process, an equivalent amount of USH is burned from the stability pool, and then, after fees, the vault’s collateral is distributed to users in the stability pool. In essence, USH is used to buy the collateral under the market rate. Users who deposit USH will also earn HDG rewards. The stability pool helps avoid a spike in the price of USH in a market downturn and also allows for lower overall collateral requirements for vaults.
Earning Hedge rewards
HDG tokens can also be staked in a pool to earn additional HDG and USH as a portion of the platform fees.
USH stablecoin
- The ceiling price of USH is $1.10, as users can always deposit the equivalent of $110 of collateral to mint $100 worth of USH. If USH is trading above $1.10, a profit could be made by selling USH on the market.
- To establish a floor price for USH, there are two different mechanisms. If a user has a loan and finds USH to be below $1, they can repay their loan at a lower price by buying more USH, in turn stabilizing the price of USH. Alternatively, they can redeem their USH.
HDG protocol token
HDG tokens are primarily used for revenue sharing. Anyone who stakes the HDG token is able to claim a proportion of all protocol fees. As the Hedge protocol evolves (with new functionality such as accepting different types of collateral), HDG tokens will be used to vote on governance and use of treasury funds.
The protocol, and in turn HDG token holders, earns fees when:
- A vault is opened
- A vault is liquidated
Token utility
The Hedge protocol issues 2 protocol tokens - USH and HDG. USH is an overcollateralised stablecoin issued by locking up collateral and as such has a varying supply over time. HDG is the protocol token. At launch, users may stake HDG to earn portion of protocol fees, which are taken during loan initiation - this model may change as the protocol matures and HDG is used for governance.