Collateralized Leverage contract

We want to create a contract that allows people to leverage their token and buy other tokens.

Workflow

Assumption

• People can deposit one (stable) coin (token x) into a pool (token X to token A) [i.e. money can be sent to contract itself.]

• There is a fixed return rate for money borrowed in the pool (say 5% per month) [this can be hard coded]

• there is a fix rate (or upgradable via function or oracle) between token X and token A (this is a simplification)

Flow

• Borrower can deposits x amount of token A and lock them for a certain period

• Borrower receives 50% of value of token A into token X

Idea is that borrower is able to use the token x to invest in other currency and only having to repay the principal (and interests) at expiration date (when the lock period ends)

2 outcomes can happen

Scenario 1 Borrower can pay back the loan

• At any time before the expiration the borrower send back amount of token x borrowed plus interests until lock period (10% per month)

• The collateral (token A) is released to him/her

• Happy path

Scenario 2 Borrower can’t pay back the loan

• Borrower doesn’t payback within the deadline

• Lender can decide to take collateral at any time

• Borrower can decide to pay back at “at the time” interest (so 5% over a longer period => lock until period + time of repayment) and unleash the collateral

Why is it useful?

Imagine it’s January 2021 you have eth and you want to hold. But you also want to leverage it in order to buy, say, Shiba.

You can deposit 2 Eth and get 1000 usdt (market price is one eth == 1000usdt and 0,5 collateral multiplier). You lock the Eth for one year.

You then use 1000usdt to buy shiba at 0.00000002 usdt. Actually something like 50bln shiba at March’s market price.

Now is November. Eth is worth 4500 usdt, and shiba is worth (0.00008845usdt), roughly 4,5mln usdt. You convert part of shiba to 1000usdt plus fees and return it.

Now thank to the leverage you not only made 4,5mln, but also got the 2 eth (minus 1k+fees usdt) appreciation!

Bonus questions

• Assuming that the exchange rate between token A and token X will be the same. What is the maximum period it is advised to issue a loan? I.E. Is there a moment where collateral will be lower than principal+interest?
• Can we add a check that allows the lender to take the collateral before the end of the lock period in case the previous situation applies?

Expected delivary

Solidity contract (can be published online on testnet or delivered as a git project). No additional files are required. Tests are welcome.