Borrowing

Borrowing lets you mint PUSD by depositing BCH as collateral. You keep exposure to BCH price movements while accessing dollar-denominated liquidity.

How borrowing works#

1. You deposit BCH into a smart contract as collateral
2. You choose how much PUSD to mint, keeping a collateral ratio of at least 110%
3. You choose an interest rate to pay on your loan
4. PUSD is minted to your wallet, and your collateral is locked until you repay

Your loan is represented as a loan key NFT (CashToken) in your wallet. The loan key is the only way to access your collateral: you need it to repay, add or withdraw collateral, change your interest rate, or close the loan.

Creating a loan#

Step 1: Collateral and amount#

You need to decide two things:

• How much BCH to deposit as collateral
• How much PUSD to borrow against it

The app shows you two key metrics as you adjust these values:

Collateral ratio: how well-collateralized your loan is. The protocol requires a minimum of 110%; below that, your collateral can be liquidated. Higher ratios mean a larger safety buffer.

Collateral Ratio = (Collateral BCH × BCH Price) / Borrowed PUSD

Liquidation price: the BCH price at which your collateral ratio falls to 110% and your loan becomes eligible for liquidation. If BCH falls to this price, your collateral is permanently forfeited to the Stability Pool. Liquidation is final and irreversible: there is no appeal, no grace period, and no way to recover the BCH afterwards.

Liquidation Price = Borrowed PUSD / Collateral BCH × 1.1

Step 2: Interest rate#

You choose your own annual interest rate, from 0% to 119.6% APR (in increments of 0.05%). This is the key tradeoff in ParyonUSD:

• Lower rates are cheaper but leave you more exposed to redemptions. Other users can redeem PUSD against your loan, extracting your BCH collateral at face value.
• Higher rates cost more in interest but protect you from redemptions. The protocol redeems against the lowest-rate loans first, so a higher rate puts you further back in the queue.

You have two options for managing your rate:

Manual rate: you set a fixed rate and adjust it yourself as market conditions change. Best if you want full control.

Managed rate: the protocol’s interest manager automatically adjusts your rate based on a risk strategy you choose (low, medium, or high risk). The interest manager can only adjust your rate; it has no access to your collateral or loan funds. This requires signing two transactions: one to create the loan and one to delegate rate management. You can reclaim control at any time.

For details on when rate changes take effect, how interest is charged, and how partial redemptions affect ongoing interest, see How interest works below.

Fees#

A one-time borrowing fee is deducted from your BCH inputs when you create a loan (not from the minted PUSD):

• 0.25% protocol fee: fixed by the protocol, applied to every loan. Goes to the ParyonUSD team as revenue; it does not go to stakers.
• 0.25% front-end fee: charged by this front-end

For example, borrowing 100 PUSD costs $0.50 worth of BCH in fees. No fees are charged for repaying or managing your loan.

Stakers do not earn from borrowing fees. Their yield comes from ongoing loan interest and BCH gained through liquidations. See Staking for details.

Worked example#

Suppose BCH is trading at $500 and you want to borrow PUSD:

	Value
Collateral deposited	2 BCH ($1,000)
PUSD borrowed	600 PUSD
Collateral ratio	1,000 / 600 ≈ 167%
Liquidation price	600 / 2 × 1.1 = $330
Protocol fee (0.25%)	$1.50 in BCH
Front-end fee (0.25%)	$1.50 in BCH
Interest rate chosen	5% APR

Both fees are deducted from your BCH inputs when the loan is created, not from the minted PUSD.

In this example, BCH would need to drop 34% (from $500 to $330) before your loan is at risk of liquidation. A 167% collateral ratio provides a comfortable safety margin.

If you instead borrowed 800 PUSD (a 125% collateral ratio), your liquidation price would be $440, only a 12% drop away. Borrowing more against the same collateral lowers your ratio and leaves less room for price fluctuations.

Loan ownership#

A loan’s token ID is shared across several NFTs, but only minting NFTs grant ownership. Your loan key is a minting NFT; the loan sidecar (held by the protocol) and any interest manager delegation are immutable NFTs that cannot access collateral. Loan keys can be duplicated, so you can keep a backup or authorize access from multiple wallets or contracts.

Accepting a loan key from someone else is risky. Because loan keys can be duplicated, holding one proves authority but not sole authority. A prior holder may have kept a duplicate minting NFT and can still drain the collateral. Before trusting a received loan key, verify on-chain that no other unspent minting NFTs of the same category exist.

BCMR-aware wallets that support the ParyonUSD parsable extension can display your loan’s live state (debt, interest rate, collateral) directly on the loan key NFT, without opening the dApp. Cashonize currently is the only wallet that supports this; see Wallet Compatibility for the full status.

Managing your loan#

After creating a loan, you can manage it from the loan detail page:

Repay debt#

Pay back some or all of your borrowed PUSD to reduce your debt and improve your collateral ratio. Fully repaying closes the loan and returns all your collateral.

Minimum partial repayment: 100 PUSD, and at least 100 PUSD of debt must remain afterwards. A full repayment (closing the loan) can be any amount.

Add or withdraw collateral#

Add collateral: deposit more BCH to raise your collateral ratio and lower your liquidation price. Useful when BCH price drops and you want to avoid liquidation.

Withdraw collateral: remove excess BCH if your loan is well-collateralized. Your collateral ratio must stay at or above 110% after withdrawal.

Change interest rate#

Adjust your rate up or down as market conditions change. If you’re on a managed rate, you can switch to manual (or vice versa) at any time.

Risks#

Borrowers face two main risks: your loan can be liquidated if BCH drops too far, and it can be redeemed against by other PUSD holders. Each risk has its own lever:

• Liquidation risk is managed by keeping your collateral ratio high (more collateral per PUSD borrowed).
• Redemption risk is managed by setting a higher interest rate (more cost over time).

Both levers trade capital efficiency for safety, and they protect against different things.

Liquidation#

If BCH price drops and your collateral ratio falls below 110%, your loan can be liquidated. Liquidation means:

• Your collateral is permanently forfeited to the Stability Pool. It is gone for good and cannot be recovered.
• Your debt is cancelled
• You keep the PUSD you borrowed, but lose the collateral

How to manage this risk: keep your collateral ratio well above the 110% minimum. Monitor your liquidation price and add collateral if BCH price is approaching it.

Redemption#

Other PUSD holders can redeem their tokens for BCH collateral from the protocol. Redemptions target loans with the lowest interest rates first. When your loan is redeemed against:

• Your BCH collateral is reduced by the amount of BCH sent to the redeemer.
• Your PUSD debt is reduced by the same dollar amount.
• You keep the borrowed PUSD in your wallet. Redemption only adjusts the loan’s debt; it does not touch your wallet balance.
• If the redemption fully repays your debt, your loan is closed and the leftover BCH collateral becomes withdrawable via your loan key. If only part of the debt is repaid, the loan stays open with reduced debt and reduced collateral, and the loan key NFT remains valid.

In dollar terms, the BCH removed is roughly equal to the debt cancelled, so you don’t lose money on the redemption itself. The asymmetry is in timing and control: collateral backing a loan stays exposed to BCH price movements and is recoverable any time you repay; BCH that’s been redeemed against you is permanently converted into a debt reduction at the prevailing oracle price, with the timing chosen by the redeemer rather than you. See Redeeming for a worked example.

There is no automatic payout of leftover collateral after a full redemption. Use your loan key to withdraw it.

How to manage this risk: set a higher interest rate to move further back in the redemption queue. The tradeoff is higher ongoing cost versus better protection.

Once your remaining debt drops below 100 PUSD, your loan becomes redeemable regardless of interest rate. Partial repayments via manageLoan cannot cause this (both the repaid amount and the remaining debt must be at least 100 PUSD), but a partial redemption can leave a loan just under the threshold. Loans below 100 PUSD bypass the lowest-rate ordering, so your rate no longer protects you.

How interest works#

The protocol runs in periods of 144 blocks (roughly one day). Interest is settled at each period boundary, and rate changes are also applied at those boundaries.

Charged on outstanding debt only#

Interest is only ever charged on the loan’s current outstanding debt, not on the original amount you borrowed. If part of your debt is paid down (by you or by a redemption against your loan), you only pay interest on what’s left from that point on. A fully-repaid or fully-redeemed loan accrues no further interest.

Paid in BCH from collateral#

Interest is collected each period from your collateral in BCH. Over time this reduces your collateral and slowly worsens your collateral ratio, so for long-lived loans with higher rates, monitor your position to ensure interest payments don’t erode your safety margin.

Rate changes take effect next period#

Because rates only change at period boundaries, a rate change you submit now takes effect at the start of the next period. While a change is queued, the app shows two numbers: the rate currently being charged, and the next-period rate that will apply once the period rolls over. The next-period rate is not final and can be overwritten any time before the period starts.