This article’s purpose is to clarify the main functions of Flux Protocol — lend, borrow, and liquidate. This article only covers the basics of the three functions, and upcoming articles will go into more detail about them!

Lend (Supplying Assets)

By supplying assets (lending) into the money maker, users can accrue interests for their supply. The asset balance of the money market accrues interest based on the specific supply rate of the asset. Users are free to view their balance at any time (accrued interest — interest receivable and interest payable); when users update their balances through a transaction (supply, transfer, or withdrawal of assets) the accrued interest is transferred to the user.

In a future article, we will detail the interest rate model adopted by Flux Protocol.

Borrow (Borrowing Assets)

Users have all rights of the borrowed assets, and can freely use these assets anywhere they can be used. Users don’t need to negotiate maturity dates, interest rates, etc. Users only need to specify the asset they want to borrow.

In order to reclaim the collateral used to borrow assets, the user needs to repay the interest accrued. Similar to the types of asset supply, every money market has a floating interest rate, determined by the market forces, which sets the borrowing cost of each asset (Borrowing Interest Rate).

In addition, and as a Flux highlight, users can use borrow cross-chain assets and use cross-chain assets as collateral. When borrowed assets are cross-chain assets, they can be cross-chained into other blockchain protocols, such as Ethereum or Bitcoin, through Conflux Network’s ShuttleFlow.

In a future article, we will go into detail about the risks that come with borrowing assets and take a deeper dive into the assets that can be used as collateral for borrowing.

Liquidate (Liquidation of Assets)

When the liquidation process occurs, the account’s collateral becomes an exchangeable asset at the current market price. Anyone (liquidator) can repay the borrower's borrowings account in exchange for the borrow account’s collateral as liquidation reward.

Any Conflux Network address can equally participate in the liquidation process without any pressure and reliance on a centralized system. On a first-in-time basis, the liquidator can invoke any portion of the outstanding borrowing. After the liquidator has repaid all or part of the account’s borrowing outstanding, it will obtain part or all of the borrower’s collateral accordingly. After the liquidator has received the collateral as a reward, the asset is owned by the liquidator.

To avoid liquidation due to the severe fluctuation of asset market prices putting an account’s borrow collateral rate at risk, every time a liquidation settlement is processed, if an account’s borrow collateral rate returns to a value greater than the liquidation collateral rate, subsequent liquidation of this account’s collateral will be withdrawn, and thus, the account’s collateral cannot be liquidated anymore.

In a future article, we will go into more detail about the liquidation process.

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Flux Protocol is a borderless lending protocol, where low transaction fees and cross-chain interoperability are the reality