About the company
Fulcrum is a cryptocurrency trading platform focused on decentralization that connects lenders and borrowers. The platform does not conduct any credit or user checks, opting out of Defi’s know your customer and anti-money laundering policies. The Fulcrum platform, which uses the open-source bZx protocol, offers a low risk of unwanted access to your cryptocurrency wallets because you, as a customer, retain control over your keys without having direct platform access. The program allows cryptocurrency owners to generate passive income without “giving up ownership” of their tokens, so making loans safer but also resulting in higher interest rates.
Fulcrum allows you to lend your cryptocurrencies without giving up control of your tokens. It differs from some bitcoin lending sites in that it does not require a minimum deposit or block duration, and you can withdraw your funds at any moment. The cryptocurrencies you deposit are placed in a pooled Fulcrum asset pool, which is subsequently used by borrowers for margin trading. When you borrow money, it is swapped for the appropriate tokens.
They are, however, interest-bearing tokens that are designed to increase in value while you retain them. You get reimbursed a prorated amount of the accrued interest when you remove a loan.
iTokens are used in the Fulcrum app to represent a lending pool’s portion. It then grows in size as a result of the borrowers’ interest payments. To exit your stake, you can trade these tokens on Uniswap, DEX, or controlled exchanges. Furthermore, on the Fulcrum platform, these tokens can be used as collateral.
Calculation of earned interest
The interest that has been collected on Fulcrum is shared among all lenders who have deposited monies. If a lender leaves the pool (i.e. withdraws his cash), the interest is dispersed across fewer users, resulting in higher interest for the remaining lenders. The interest earned is divided among the lenders by their token holdings.
Interest rate calculation
Fulcrum’s interest rates are based on the supply and demand premise. When a lender provides funds, the interest rate decreases, while when a client borrows funds, the interest rate increases. Interest rates on currency loans can vary from 1% to 40%, depending on the amount borrowed and the assets available. In general, if the credit pool has a large number of assets, the borrowing rate is reduced to encourage traders to use some of the assets. These interest rates might change from one day to the next and from one currency to the next.
An insurance program is intended to reduce any potential losses experienced by lenders if any loans on the Fulcrum platform are undersecured and not properly liquidated. The borrowers pay a ten percent interest rate to fund this insurance fund. The risk of lending your cryptocurrency on the site is reduced as a result.
Borrowing cryptocurrency from the platform is done through another loan site operated by the same parent firm, Torque, rather than directly through Fulcrum. Borrowing is as simple as using other platform services, with the only requirements being that you have an Ethereum wallet, some ETH to pay with, and some ERC20 tokens to use as collateral. The amount of collateral you must post is determined by the ratio of collateral to the over-collateralized loan, which reduces the risk to lenders. Only when the service margin falls below 15% and in an amount that brings the maintenance margin up to 25% will your position be liquidated. The risk of slippage that can occur with massive liquidations is reduced with this partial liquidation.
Fulcrum’s platform offers cryptocurrency margin trading, including leveraged trading as well as buy and sell. Traders can expand the number of assets they can trade by using leverage, which increases both potential gains and losses. Margin loans are leveraged assets that require the trader to put up a percentage of their assets as security. This is determined using the collateral to loan ratio; if the transaction falls below the stipulated ratio, a portion or all of the position is liquidated, and payments to the lender are made with collateral. To start a trade, you’ll need to first create an Ethereum wallet with the cryptocurrency you’d like to utilize. The Fulcrum platform makes it simple to choose whatever market you wish to trade-in. You can utilize up to 1:15 leverage at Fulcrum. You have the option to partially close your holdings after opening a transaction, but not fully. This is advantageous for people who merely want to withdraw a portion of their funds. You can also modify the deposit by depositing or withdrawing cash.
Customers who open a transaction with Fulcrum must pay interest for the first 28 days, which is subsequently distributed to the lenders. The remaining payments will be reimbursed to you if you close your position before the conclusion of this period. All Fulcrum costs are paid in Ethereum (ETH), however, any ERC20 token can be used as collateral. Manual payments or rollover positions that employ collateral to pay 28-day interest must be used to preserve the interest buffer. Ethereum gas costs are also paid as a kind of transaction security (the cost of gas upon renewal and the equivalent of the cost of gas as a reward for the contractor). A portion of the stake will be liquidated if the rollover value exceeds the collateral value. Automatic renewal is more expensive than making manual interest payments upfront, and Fulcrum suggests making manual renewal payments to save money. If you already have an open position, an increase or decrease in the number of lenders in the Fulcrum asset pool does not represent a drop or increase in interest. Borrowing cryptocurrency from Torque comes with a 0.09 percent clearance fee and a 10% interest fee. Traders that borrow cryptocurrency from Torque receive vBZRX tokens in exchange for 50% of their commissions. All transactions are also subject to a 0.15 percent charge.