Collateralised Loans

[KhaledElawadi]

XRPL New Proposal:

Collateralised Loans

Abstract

A common occurance when trading crypto is buying in on a dip only for it to fall further sometimes more than 10% in a day and then having to wait hours, days even weeks for the investment to recover before going into profit.

Being all in and out of cash makes it impossible to take immediate advantage of this on the XRPL.

This proposal is to make available onchain collateralised loans where both traders and general investors alike can take advantage of price swings by either providing liquidity for loans or depositing some of their XRP into the "XRPL Treasury" which will provide automatic loans in RLUSD or XRP.

For example, I deposit $10,000 worth of XRP into the Treasury and instantly receive a $6,500 loan in RLUSD or the equivalent in XRP for upto 28 days with a 1% interest charge ($100).
A sell order is only triggered on this XRP collateral should it fall in value to $6,800 which is the original $6500 loan + $100 interest fee + 2% slippage tolerance.
From that moment the price of XRP would have to fall a further 32% after taking out the loan and within the next 28 days period before XRP collateral would be sold and any funds over $6600 returned to my account.

However, should the price of XRP increase during the next 28 days then I can choose when to pay off the $6600 loan in either RLUSD or using the equivalent in XRP to get my original XRP collateral returned.

In essence this decentralised loan mechanism which is a somewhat basic smart contract will be built in at the protocol level and hence all loans including all loan repayments are guaranteed by the Ledger itself.

There are at least three different ways of achieving this and one is not too dissimilar to our AMM operations.

An RLUSD lending pool can be set up at the Treasury where liquidity providers receive LP tokens and each time a loan is paid back the 1% interest fee collected in RLUSD or XRP equivalent is added to the pool and the corresponding LP tokens burnt to enrich LP'ers.

Another method might be to incorporate this loan function directly into Smart AMMs (SAMMs), so that the loans are taken directly out of the RLUSD/XRP AMM liquidity pool in either RLUSD or XRP and each 1% interest charge that's added to the pool becomes another source of revenue for AMM Liquidity Providers.

A third method might be for investors to deposit set amounts such as 5K, 10K, 50K, 100K and 1M RLUSD into the Treasury which are itemised loans and then a simple UI with a drop down pick n mix menu will allow users to select which loan/combination of loans that they require and transfer the necessary amount of XRP to the Treasury in order to secure them.

Inviting comments...