Since our mainnet launch, Scallop has been at the forefront of reshaping the traditional paradigms of the money market.
By offering support for multiple Sui assets including Liquid Staking Derivatives (LSDs) and innovative protocol design like our Trilinear Interest Rate Model, Scallop is proud to be the leading money market on Sui Network.
Over the months, one of the challenges we noticed in the Sui lending space is the problem of increasing idle assets due to over-emphasis placed on supplying/locking up of assets. This significantly reduces the liveliness of the DeFi space due to the lack of free flowing liquidity.
As such, Scallop would like to be at the forefront and lead the change for a better DeFi ecosystem on Sui Network.
Borrowing-Centric Incentive Model
Next week, Scallop will enter a test period by increasing the SUI Borrow Incentives gradually by reallocating from SUI Supply Incentives.
This implementation aims to drive more borrowing activity on Scallop and on Sui Network as a whole, and Scallop Lend is also a borrowing-driving lending model.
Detailed Look on SUI Incentive Allocation:
Week of 29 April: Supply Incentives (50%) / Borrow Incentives (50%)
On top of SUI Incentives, Scallop Borrowers will also be eligible for SCA Boosted Borrow Incentives, receiving up to 4X of their Borrow APR.
To maintain a healthy ecosystem, Scallop Lenders will still be incentivised by our SCA Incentives.
Why Move Towards Borrow-Centric Model
- Increasing Under-utilised Assets: With traditional money markets placing an emphasis on Supply to boost TVL, there is an influx of assets being locked up and unused. To promote a more dynamic Sui ecosystem, incentivised borrowing will be the driving factor.
- Promotes Growth on Sui DeFi: By encouraging the borrowing of assets, Scallop helps to provide growth opportunities for the overall Sui DeFi ecosystem as users will be able to participate in more Sui DeFi protocols.
One of Scallop’s unique features is its distinction between lending and collateral pools. Encouraging borrowing will benefit both lenders and borrowers, as demand for borrowing also positively impacts lenders.
Simply put, Scallop’s interest rate model works in three distinct phases with each interest rate triggered by different levels of capital utilization. As the borrowing rate increases, the utilization rate increases to trigger a higher interest rate for those who supply their assets on Scallop. This would eventually benefit Scallop Lenders as well by earning greater interest rates.
Getting Started with Borrowing
Step 1: Head to Scallop dApp.
Step 2: Switch over to Scallop Borrow tab. If you are new to Scallop, you will first need to create a “New Obligation”.
Step 3: Under “Collateral Pools” tab, select a pool to deposit some collateral. We highly recommend depositing LSD assets like afSUI, haSUI and vSUI as collateral.
Do note that you will not be able to borrow the same asset that you have deposited as collateral (E.g. You cannot borrow SUI if you deposit SUI as collateral).
Step 4: Switch to “Borrowing Pools” tab. Select the asset that you would like to borrow from Scallop.
As you can see, borrowing certain assets like SUI, USDC and USDT will provide SUI and SCA incentives.
Earn More by Staking SCA
Users who stake SCA for veSCA will be able to receive up to 4X BOOST for their SCA Borrow Incentives!
SCA Staking Platform: https://app.scallop.io/vesca
veSCA Boost Calculation
The amount of incentive boost received depends the amount of veSCA held with respect to the user’s borrowed amount.
The more veSCA held, the more a user can borrow to receive the Maximum Incentive Boost!
The incentive boost will be calculated based on percentages of user borrow amount compared to total borrowed amount on Scallop, and veSCA held compared to total veSCA amount.
To illustrate:
User borrows a percentage of the total borrowed amount on Scallop: B%
User holds a percentage of the total veSCA amount on Scallop: V%
If V% ≥ B%, Boost = 4
If V% < B%, Boost = 1 + 3 * (V/B)
For example:
As you can see, user C will get 4x the SCA reward compared to user A even with the same borrowed amount.
SCA Incentive Distribution
Users who hold veSCA will have a multiplier applied to their final APR.
For example:
Given that the current SUI borrowing pool incentive is 25.02%.
User has 4x boost from holding veSCA.
Final APR amount = 25.02% x 4 = 100.08%
As you can see, it is highly advantageous to stake SCA for veSCA in order to maximise your yield returns.
To estimate your boost amount, try out Scallop’s official veSCA Boost Calculator!
Scallop Borrowing Fees
To support further growth and development for Scallop’s platform and ecosystem, there will be adjustments made to Scallop’s borrow fees:
Current Borrow Fee: 0.1%
New Borrow Fee: 0.3%
This change will be implemented from 29th April onwards.
This change in borrow fee will be essential for Scallop’s future growth and development, as we have some exciting plans and implementations coming out this year.
Here are some sneak peeks:
Referral Program (Q2 2024): Referrers holding veSCA will be able to earn a share of borrow fees from their referee, while referees will receive a discount on their borrow fees.
Revenue Distribution (Q2 2024): veSCA holders will be able to receive additional upsides as Scallop progresses and grow.
Enhanced Decentralization (Q3 2024): veSCA will play a crucial role in further decentralizing governance, giving holders more influence over protocol amendments and updates.
Come join the Scallop community today!