Core Markets

Last updated 5 months ago

Core Markets

Core Markets on BENQI represent the primary lending and borrowing pools for widely used, highly liquid assets such as AVAX, QI, USDC, DAI, WBTC, and more.

Users can deposit assets into Core Markets to earn interest, which is determined algorithmically based on the supply and demand of each asset. These deposits also serve as collateral, allowing users to borrow other assets within the platform. Borrowing limits are determined by the collateralization ratio of the deposited assets, ensuring that all loans are backed by sufficient collateral to maintain market stability.

Key Features

Collateral Flexibility: Users can supply assets to the Core Markets as collateral and borrow a variety of tokens, including stablecoins and more volatile assets.
Market Stability: Core Markets are designed with broad liquidity and lower risk, ensuring stability for assets that are widely traded and used across the Avalanche ecosystem.
Borrow Any Asset: In Core Markets, users can borrow any available asset using their deposits as collateral, providing flexibility across the platform. In contrast, Avalanche Ecosystem Markets only allow borrowing stablecoins like USDC.

Example: Lending AVAX

Suppose you hold AVAX and believe its value will increase over time, but you need liquidity for a new investment.

Instead of selling your AVAX, you can deposit it into BENQI's Core Markets, earning interest. You could then use it as collateral to borrow USDC against your AVAX. This allows you to retain your AVAX exposure while accessing liquidity for other opportunities, without needing to sell your original asset.

However, as mentioned, one should be mindful of liquidation risk. If AVAX’s value suddenly drops, your collateral ratio may decrease, putting your loan at risk of liquidation unless you repay part of the loan or add more collateral to maintain a healthy position.

We cover liquidations in-depth here: Protocol Parameters

Users should always be cautious about the health of their loans. For example, if they lend out an asset like AVAX and borrow against it, a sudden drop in AVAX’s value could lower their collateral ratio, putting them at risk of liquidation. To avoid this, users may need to repay part of the loan or add more collateral to maintain a healthy loan position.

We cover this in greater depth in Health & Liquidations