Troves

What is a Trove?

A Trove is Soneta’s version of a 'vault.' Each Trove is linked to an address in the Sonic Network, and each address can have multiple Troves.

Each Trove enables you to manage a loan, adjusting collateral and debt values as necessary, while also allowing you to set your own interest rate.

What types of collateral can I use?

The following assets can be used with Soneta:

• wS [Sonic]

• stS [Beets Protocol]

• wOS [Origin Protocol]

• LBTC [Lombard Finance]

Is there a minimum debt?

Yes, a minimum debt of 2,000 ONE is required for borrowing when opening a trove.

When do I need to pay back my loan?

Loans issued by Soneta do not have a repayment schedule. You can keep your Trove open and repay your debt at any time, as long as you maintain a healthy LTV (the amount of debt you can secure using your crypto as collateral).

Is there a lockup period?

There is no lockup period; users can withdraw their collateral deposits at any time.

How do I decide on my LTV?

Ultimately, it depends on your personal preference, especially your risk tolerance and how actively you want to engage in managing your position(s).

The 'Collateral Ratio' portion within the Troves section of the Soneta App assists you in selecting a percentage that indicates how much you wish to borrow compared to your supplied deposit (if a deposit has already been entered, it will automatically also set your 'borrow' amount in relation to the percentage selected):

Next, we have the the 'Interest Rate Slider' which allows the user to decide what they would like to be paying on a yearly basis towards the loan. The Trove with the lowest interest rate will be the first available for Redemption [See Redemptions].

The final portion of the Troves section displays vital information about the trove being created such as the liquidation price, the liquidation risk, the redemption risk, etc.

If your LTV becomes too high, your position will be liquidated.

How do Liquidations work in Soneta?

Troves get liquidated if the LTV goes above the maximum value.

Soneta uses Stability Pools as its primary liquidation mechanism to absorb liquidated debt and collateral. Each borrow-market has its own dedicated Stability Pool earning liquidation gains (in the respective collateral) in exchange for burning debt.

A liquidated borrower usually incurs a penalty of 5% and will be able to claim the remaining collateral after liquidation.

A special case is when a Redistribution is necessary, then:

• For S the loss amounts to 10% of the debt. That corresponds to a maximum loss of 9.09% expressed in terms of collateral.

• For stS, wOS, and LBTC the loss amounts to 20%, corresponding to a maximum loss of 16.67% expressed in term of collateral

What is the max Loan-To-Value (LTV)?

There is no maximum Loan-To-Value ratio imposed.

What is the refundable gas deposit?

To open a new Trove, the protocol requires a liquidation reserve of 1 $S regardless of the chosen collateral, which is set aside to cover the gas costs of a potential liquidation. The deposit is returned when the Trove is closed by the user (including upon redemptions)

Can I adjust the rate?

Yes, you can always adjust your interest rate at any time. Since you as a user get to set your own interest rate, you have full autonomy over your borrowing costs.

Note however, that a fee corresponding to 7 days of average interest is charged when opening the loan, as well as on any rate adjustments that happen less than 7 days after the last adjustment. Without it, low-interest rate borrowers could evade redemptions by sandwiching a redemption transaction with both an upward and downward interest rate adjustment, which in turn would unduly direct the redemption against higher-interest borrowers.

How do I decide on the right rate for me?

Setting an interest rate determines a user’s redemption risk and needs to be aligned with your goals and how actively you want to manage your position.

By opting to manage your own rate, you will have to weigh the savings from a lower rate against the higher redemption risk and the increased adjustment frequency with potential additional costs (gas costs).

Since redemptions are performed in ascending order of interest rate (for the respective collateral asset), you will typically want to keep a buffer of other borrowers with lower rates in front of you. Choosing higher rates may increase the recurring costs of your loan, but give you peace of mind regarding unexpected market fluctuations.

Keeping an eye on the past redemption activity can help you assess the overall redemption risk, serving as an additional data point for your rate selection.

In general, those willing to actively monitor their positions, or borrowing for shorter periods of time, may opt for lower rates. Conversely users optimizing for a more passive, long-term position would be better off with setting a higher relative interest rate.

What determines the riskiness of my Trove?

There are two key parameters to consider:

• Loan-to-value (LTV): This is based on your debt-to-collateral ratio and affects your risk of liquidation.

• Interest rate (IR): You set this rate yourself, and it influences your risk of being redeemed.

You have the flexibility to set these parameters as you see fit, allowing you to control the relative riskiness of each Trove. You can create multiple Troves under the same address, enabling you to manage different risk profiles for different portions of your portfolio.

Are there any other fees related to borrowing?

As of right now, there are no other fees associated with borrowing.

How many Troves (loans) can I open with the same address?

You can have multiple open Troves for the same collateral or across different collateral types, all represented as separate NFTs.

Am I able to loop my exposure?

As of right now Soneta has no implementation to allow the looping of deposited collateral.

How are collateral risks mitigated?

Soneta will have six separate borrow markets for the different collateral types with their own Stability Pools (for efficient liquidations), user-set interest rates, and LTV factors for their respective assets (S, stS, wOS, and LBTC).

Risks are mitigated by a collateral shutdown as an emergency measure to maintain system balance and protect against market instability.

Keep in mind that despite all these measures, ONE remains dependent on the six mentioned collateral assets and there is no strict guarantee that it remains over-collateralized in case of a sudden collapse of a collateral asset.

How does the system compartmentalize risk among different LSTs?

This depends on the party in question:

• Borrowers: Collateral risk is limited to the collateral asset held by the borrower. A borrower isn’t negatively affected by a failure of another collateral asset.

• ONE Holders: As a multi-collateral stablecoin, ONE is reliant on effective liquidations of under-collateralized loans in every borrow market to remain over-collateralized. Holders are subject to the risks of all supported collateral assets.

• Earners: Stability Pool depositors only get exposure to the asset they have opted for. However, as ONE holders, they are similarly affected by potential de-pegging.

What mechanisms are in place if the Stability Pool is empty?

SRC (Shutdown System Collateral Ratio):

If the system’s total collateral ratio (TCR) for a given collateral falls below the SCR, the protocol triggers the shutdown of the borrow market and permanently disables all the borrowing operation except for closing troves

Soneta App - Troves

The following shows what it would look like when creating a Trove:

The following shows what it would look like when adjusting a Trove: