Collateral & Lending
How can XAUm be used as collateral for stablecoin borrowing?
XAUm can be pledged on partnered lending platforms as collateral to access stablecoin liquidity. The gold-backed nature of XAUm ensures its stability, making it an attractive asset for large volume borrowing. Borrowed stablecoins can then be redeployed into various strategies, preserving exposure to gold while generating additional returns.
Yield Generation strateties can refer to:
What are the typical LTV (Loan-to-Value) ratios offered for XAUm collateral?
Depending on the lending platform, XAUm LTV ratios range can from 70-93%. This is in line if not higher than the most liquid crypto assets and stablecoins ie ETH, (W)BTC, USDT and USDC.
Which platforms or protocols currently accept XAUm as collateral?
XAUm can be used as collateral at the following venues:
What are the DeFi risks associated with using XAUm for loans and how are they mitigated?
The use of XAUm as stablecoin collateral in DeFi introduces five primary categories of risk. Matrixdock has implemented robust mitigation measures to address these risks and ensure the security and stability of XAUm.
Platform counterparty risk
Platform counterparty risk arises from potential failures of DeFi platforms managing XAUm collateral or loans, including insolvency, mismanagement of funds, or fraudulent activity.
Mitigation measures:
On-Chain Transparency: XAUm transactions and reserves are fully verifiable on-chain, supported by monthly asset attestations to ensure integrity and trust.
Smart Contract Security Reviews: All XAUm deployments are rigorously reviewed by Matrixport’s blockchain security team to ensure comprehensive risk assessment and adherence to best practices.
Time-Tested Partnerships: Matrixdock partners exclusively with established and reputable DeFi lending platforms, focusing on those with proven operational reliability and long-term community trust.
Smart contract risk
Smart contract risk arises from potential bugs, vulnerabilities, or exploits in the code managing XAUm’s lending and collateralization processes.
Mitigation measures:
Extensive audits: All XAUm-related contracts are subject to rigorous audits by leading blockchain security firms before liquidity provisioning.
Modular design: Contracts are designed with isolated functionalities (e.g., token, NFT, messaging) to minimize systemic impact in the event of a failure.
Oracle risk
Oracle risk occurs when the data feed providing XAUm’s NAV or price information is compromised or inaccurate, leading to incorrect collateral valuations or liquidations.
Mitigation measures:
Chainlink Price Feed: Matrixdock leverages Chainlink’s decentralized and trusted XAU/USD feed to ensure accurate, tamper proof data.
Backup Oracle by Matrixdock: A dedicated backup oracle, hosted by Matrixdock, provides redundancy to support reliable data availability and ensure seamless 24/7 liquidation operations.
Network risk
Network risks involve delays or disruptions caused by blockchain congestion, downtime, or vulnerabilities in cross-chain bridge mechanisms for XAUm.
Mitigation measures:
Proven blockchains: XAUm is deployed exclusively on blockchains with proven security, liquidity, and user track records, such as BNB Chain.
Chainlink CCIP: Matrixdock leverages Chainlink’s Cross-Chain Interoperability Protocol (CCIP) to ensure secure and reliable cross-chain transfers.
Market risk
Market risks arise from fluctuations in XAUm’s value, driven by changes in gold prices or reduced liquidity during extreme market conditions. Users can collateralize their assets and apply leverage according to their preferences. While gold generally provides greater stability compared to crypto assets, adopting aggressive strategies can heighten risks.
Mitigation measures:
Overcollateralization: All loans collateralized with XAUm are over-collateralized, providing a buffer against price volatility.
1:1 LBMA gold backed: XAUm is fully backed by LBMA-accredited gold reserves, ensuring a stable and reliable mechanism for liquidation.
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