How to use Umee
We will show you how to use the services of the Umee project
In this article we will talk in detail about what Umee offers to users. Let’s start with recalling that in the field of DeFi, lending is most often based on over-collateralization. This means that in order for users to borrow an asset, they need to provide another asset they already have as collateral.
This approach kills two birds with one stone: the borrower receives the funds he needs, while the collateral provided by him is given as a loan to another user. These processes do not require verification of creditworthiness or personal information, everything is done automatically through smart contracts. Usually, platforms set their own risk structure in order to maintain a normal ratio and a threshold value based on the properties of crypto assets. This is how market volatility is maintained.
Umee provides access to cross-chain lending and borrowing. This means that users can provide assets as collateral tied to one blockchain, and borrow assets on another blockchain. The same applies to lending. Umee users will be able to receive interest on loans or interest rates on their collateral, which in the future can help them maximize profitability and maintain a healthy position. Such a cross chain approach expands the boundaries for users and ensures the compatibility of the whole cryptosystem.
All lending and borrowing functions are currently carried out on Ethereum, so it is necessary to have a wallet compatible with the Umee blockchain, or an Ethereum wallet with configured assets that you are going to use. Also, do not forget that there should be a little $ETH on your wallet to make transactions
Lending
Lenders in Umee can deposit any amount in the lending protocol. To place a deposit, you only need to pay transaction fees, and after making a deposit, you can receive passive income in the form of interest on the loan. Lending rates are determined by market supply and demand.
1 Open the Umee app and in the upper right corner, connect your wallet, for example, MetaMask.
Now switch to “Supply” in the left part.
This page displays the available assets, their number, and APY, which shows interest rates, and collateral.
We remind you that the rates are not fixed and may change depending on supply and demand
2 Select a token and then enable it to give Umee permission to interact with them.
Confirm the action in the pop-up window of your wallet. This will be a one-time transaction.
3 Then deposit the required amount. You can use the panel to easily deposit a certain percentage of the balance available in your wallet.
Click “Supply” and confirm the transaction in the wallet. Done!
To withdraw tokens, you also need the “Supply” tab, in which you select an asset and click “Withdraw” in the upper-right corner of the pop-up window, enter the amount you would like to withdraw, and confirm the transaction in your wallet.
Borrowing
In order to get a loan, you must first deposit assets as collateral. After depositing, you can use uTokens or meTokens as collateral to borrow any Cosmos or Ethereum asset. The amount for the loan is determined by the amount of collateral provided by the borrower and the ratio of the loan to the value of a particular asset. Interest rates depend on the total loan amount and are available for borrowing from the pool in real time. Borrowers must repay their loan plus interest in the form of a borrowed asset in order to withdraw all their collateral.
Let’s talk a little bit about uTokens and meTokens — these are two types of collateral tokens.
uTokens are borrowed assets, as well as interest earned through the lending of assets. They are received by creditors after the deposit sent to the Universal Debt Facility via the Umee Bridge has been confirmed. uTokens comply with the ERC-20 standard and can be transferred both between Cosmos and Ethereum blockchains via the two-way peg.
meTokens are staked assets and rewards for staking. They are received by users who have stuck their tokens through Umee in the Cosmos ecosystem. Along with the reward for staking, they also get meToken. For example, if a user stakes the $ATOM token via Umee, along with the rewards, he receives meATOM. meTokens tokens also comply with the ERC-20 standard and can be transferred both between the Cosmos blockchain and between the Ethereum blockchain via the two-way peg.
1 Open the Umee app and in the upper right corner, connect your wallet, for example, MetaMask.
On the left, select “Borrow”
On this page you can see the available assets and APY, which displays the current rates.
2 By analogy with lending, select the token you want to borrow and activate it.
Then enter the amount (you can also use the panel to borrow a certain percentage of your borrowing limit) and confirm the transaction in your wallet. Done!
Be careful with the liquidation, keep an eye on the state of your position!
3 To repay the loan and interest, stay in the “Borrow” tab. Select the asset, and in the upper right corner click “Repay”, then confirm the transaction in your wallet.
Borrowers do not have a deadline to repay DeFi loans. As long as the loan-to-value ratio of borrowers remains under control, they can choose when to repay their loan. The loan-to-value ratio is the value of the borrowed asset relative to the value of the collateral deposited in terms of the borrowed asset. This indicator is necessary to track the status of each secured credit position.
It is also important to talk about liquidation here. It occurs when the borrower’s loan-to-value ratio increases above the required threshold before an under-secured credit position arises. The liquidation mechanism ensures that loans can always be repaid in full to ensure the safety of creditors’ assets. So, borrowers need to maintain a healthy position with excessive collateral, otherwise they risk being liquidated. Note that users who stake their assets through Umee can use the rewards for staking as a liquidation for another asset.
To avoid liquidation, it is worth borrowing an amount less than the collateral provided. And also make more collateral if the loan-to-value ratio becomes less healthy. And of course make loan payments on time, as the loan-to-value ratio becomes less healthy.
Guys from Umee made a short video, check it out if you need more visual information.
Website:
Twitter:
Telegram:
