TomoX Lending : Auto Repay

Technical Discussion TomoX
1

Hi!

What happens if a borrower does not repay a loan before it expires?

I assume this type of event is referred to as “Auto Repay” in the documentation (https://docs.tomochain.com/masternode-and-dex/tomox/tomox-p2p-lending), is that right?

If that happens, how exactly is the value of the collateral determined?

Also, will the lender receive some kind of penalty? The potential issue I have in mind is the following: a borrower could borrow a big amoung of USDT with Tomo collateral. If the Auto Repay function uses the spot price of Tomo, the borrower may prefer to keep the USDT since it would be equivalent to a sale withtout slippage (so if I want to sell 100,000 Tomo without slippage, I could borrow USDT with Tomo collateral for a 1-day loan and not reimburse the loan). On the other hand, the lender would then have 100,000 tomo on hands and for sure he will not be able to reconvert to USDT without slippage. Hence, the lender will have to assume a big loss versus the interests earned for a 1-day loan.

This seems like a potential “attack” vector to me depending on how the auto repay function works.

Thank you for the details.

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2

There are 2 situations could be happen, the first one is auto repay. By default, if the Borrower has enough balance of the borrowed asset, TomoX will automatically repay the loan on the due date, it means if you have enough USDT + interest rate in your wallet.

The second one, if borrower dont have enough USDT to pay the loan, TomoX will calculate the price of TOMO/USDT then collateral will be sent to lender with the ratio is 100% value + 10% penalty (as a mechanism to prevent the slippage) + interest

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Thank you very much for the information. As a lender, it gives me comfort to continue providing liquidity.

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