Introducing Self-Repaying Loans: A First for Efficient Leveraging

TLDR Summary

  • Self-Repaying Loans coming for MOR on Avalanche, which means your debt goes down at a fixed rate every second.
  • Earn yield + leverage farm at the same time. This means that your debt goes down while your collateral balance goes up — users are effectively paid to leverage farm.
  • Borrowers never pay a dime in interest; in fact, they are the ones getting paid to borrow.
  • Constant flow of funds into the Peg-Stability Module — helps keep MOR at peg making it easier for users to leverage their yield-farming positions


How MOR’s Self-Repaying Loans Work

  1. MOR takes a higher performance fee on yield earnt (compared to regular vaults) and converts it to USDC.e
  2. This USDC.e is then injected into what’s called a secondary PSM. A secondary PSM works in the same way as the primary PSM but has an extremely high minting price (Instead of it being 1.001 USDC.e to mint 1 MOR it maybe costs 1000000000 USDC.e), but the only one minting MOR in the secondary PSM at these rates is the protocol converting the extra USDC.e from performance fees.
  3. This injected USDC.e earns yield by lending through Banker Joe . The key here is that the yield earned increases faster than the negative interest the user is receiving, so both parties are still profiting.
  4. The secondary PSM then provides a constant reserve flow that can be used refill the primary PSM & facilitate swaps from MOR > USDC. Arbitrage bots trade the price difference when MOR de-pegs (typically when the primary PSM is empty of USDC.e), moving USDC.e funds from the secondary to the primary, which ultimately facilitates the users ability to easily redeem their MOR for USDC.e.

An Example of Self-Repaying Loans in Action

  1. Converting JOE to xJOE (with yield coming from swap fees) — currently gives ~21% APR, and 100% of this is always going directly to the user (no performance fee here).
  2. Staking xJOE in the Trader Joe farm — currently yielding 30.5% APR.

User Profit

Protocol Profit

The JOE being harvested is split into 3 categories to help fund self-repaying loans for the user, therefore decreasing their risk.

Available Collateral on Avalanche

All assets earn yield through Trader Joe — either through Joe’s farms for LPs, or their money market protocol “Banker Joe” for single assets.

Assisting with MOR’s Peg