🔄Lend Ratio Shifts

In this section we will discuss how to estimate costs of rollover depending on the lent ratios.

There really can only be two different scenarios for rolling over from one pool to another:

• Origin pool has lower or equal lend ratio than the destination pool.

• Origin pool has higher lend ratio than the destination pool.

The first case would mean that in the destination pool you could get more lent out to you for the same amount of collateral. For that reason you would get reimbursed the difference in collateral.

The second case would mean that in the destination pool you could get less lent out to you for the same unit of collateral, so you will need to repay the difference in that case. Let's look at examples to better understand this:

Example 1: Alice has borrowed 2000 DAI against 1 WETH in the pool that has lend ratio of 2000 and repayment due date of January 31st. She then wants to rollover to a pool with same lend and collateral tokens but repayment due date on February 28th and lend ratio of 2500. This would mean that to back her loan of 2000 DAI she no longer need to have a full 1 ETH as collateral. For that reason on this particular rollover she will be reimbursed 0.2 ETH.

Example 2: Bob has borrowed 2000 DAI against 1 WETH in the pool that has lend ratio of 2000 and repayment due date of January 31st. He then wants to rollover to a pool with same lend and collateral tokens but repayment due date on February 28th and lend ratio of 1500. This would mean that his collateral of 1 ETH is no longer enough to back the loan of 2000 DAI and he needs to repay part of his loan. In this case he would need to repay 500 DAI.