Iron Bank

The Iron Bank is first and foremost, a normal lending solution. Anyone can supply and borrow assets and there are zero restrictions besides the collateral and reserve factors.

If a protocol requests to borrow without posting collateral, then the parameters and implementation details are determined directly with the Iron Bank team.

The Iron Bank will not offer credit facilities to just any protocol. Comprehensive diligence is completed up-front, prior to accepting an uncollateralized borrower.

Collateral & Reserve Factor

The reserve factor is the percentage of fee paid to the Iron Bank. If the reserve factor is 10, then that would imply that 10% of the interest paid on the asset is for the Iron Bank.

In the other hand, the collateral factor is the maximum you can borrow on a particular asset.

Example: The collateral factor for ETH is 85%, if the price of ETH is considered as $1000, the max you will be able to borrow in other assets is worth $850

Like all money market protocols in DeFi, smart contract risks and systemic risks of the underlying crypto assets exist. We highly recommend users research the risks involved and obtain proper insurance coverage to offset these risks. Yields in the Iron Bank generally range from 20–40% APY on stablecoin deposits.

Utilization rates are higher in the Iron Bank than the other money markets because the Iron Bank facilitates uncollateralized, protocol to protocol lending to whitelisted partners like Alpha Finance’s Alpha Homora and Yearn Vaults. The high utilization ratio (ratio of total borrowed assets to total supply assets) can sometimes lead to lower available liquidity for large suppliers to withdraw.

Factors we consider in whitelisting protocols for the Iron Bank include reputation, track record, smart contract audits, insurance coverage, and treasury value and liquidity.

Additionaly, we look at these aspects to ensure that the debt with Iron Bank is paid back:

Financial Backstop — Partners provide / escrow tokens as backstop and credit is given up to that limit.

Insurance Coverage — Partners purchase Cover Protocol or Nexus Mutual insurance and credit is given up to that limit.

Smart Contract review — Contracts are reviewed / audited by reputable firm(s), and are immutable.

Exploits that occur through the under-collateralized borrower will remain debt between the protocols. It is the responsibility of the exploited borrower to repay the Iron Bank. End user funds are safe.

The Iron Bank currently uses Chainlink’s oracle solution for its assets. You can read more about it here.