This user guide was created in collaboration with NEAR Mates and NEAR Insights. Follow them on Twitter for more quality NEAR content like below.
What is Burrow?
Burrow is a decentralized, non-custodial, autonomous money market similar in nature to Aave and Compound.
Burrow aims to unlock liquidity for interest-bearing assets, particularly layer 1 staking derivatives such as stNEAR and stETH. Users of Burrow will be able to deposit stNEAR as collateral, then borrow more NEAR to create a leveraged staking position, or borrow a stablecoin to make a self-repaying position.
New to NEAR?
If you don’t have a NEAR account, just follow this guide to set up your NEAR wallet first!
Connect Your NEAR Wallet
Launch the Burrow app and connect your NEAR wallet at the top right corner.
How to Supply
Users can supply assets to the protocol and begin earning interest.
The interest rates are variable and will fluctuate based on the utilization rate for the given asset. (More info on the interest rate model here.)
Supported assets at launch:
- stNEAR (staked NEAR)
- BRRR (Burrow’s native token)
1. Go to “Deposit” and choose the asset to supply
Browse to the “Deposit” section and click on the asset you want to deposit.
2. Select the amount you’d like to deposit and submit your transaction.
3. Once you have deposited your assets, you now have two options:
(1) Enable “Use as collateral.”
This means that you will now be able to borrow assets against the amount you deposited into the supply pool.
This also means that your funds can potentially be liquidated. See “Health Factor” and “Liquidation” sections below for more info.
(2) Simply supply assets, don’t “use as collateral.”
This means that you will simply earn interest on the amount you supplied to the pool, without further borrowing any assets. In this case, your assets are not subject to liquidation.
You can always turn on “use as collateral” later in your “Portfolio” page.
4. Approve the transaction in the NEAR wallet prompt.
Your deposit is now successfully registered, and you can begin earning interest. The “APY” (annual percentage yield) number tells you how much you can expect in $BRRR rewards for supplying assets.
How to Borrow
Now that you have supplied your assets to Burrow’s liquidity pool, you can also borrow funds against it.
1. Designate your assets as collateral
In order to borrow assets, you must first enable “Use as Collateral.” If you haven’t turned on the “Use as collateral” button while depositing, you can adjust your position in the “Portfolio” → “Adjust Collateral” section.
On Burrow, you can pick and choose which deposited assets you want to use as collateral, as well as customize the rate of colleteralization.
2. On the “Borrow” page, select the asset you want to borrow
3. Enter the amount you want to borrow, keeping in mind the resulting Health Factor
What is the “Health Factor?”
The risk of a position can be understood through the Health Factor, which represents the combined collateral ratios of the borrowed assets.
- If the health factor is higher than 100%, it means the account is in a good state and can’t be liquidated.
- If the health factor is less than 100%, it means the account can be partially liquidated and can’t borrow more without repaying some amount of the existing assets or providing more collateral assets.
To learn more about how the health factor is calculated, see here.
What is “Liquidation?
Liquidation is when your position is forcefully closed by the protocol (i.e. your collateral is sold off) because, due to changes in market conditions, the value of your collateral is no longer enough to secure your debt based on the Health Factor, meaning that you are at risk of not being able to pay off your debt. This kind of insolvency threatens the protocol, and therefore a liquidation event is triggered through bots to prevent it in advance.
This might happen when:
- The collateral decreases in value (e.g. wNEAR price decreases from 20$ to 10$)
- The borrowed debt increases in value
You can read more about liquidation here.
When your Health Factor is…
- Green: Your funds are (generally) safu
- Yellow: Risk is moderate
- Red: Your funds are at a high risk of being liquidated
- We recommend users DO NOT set the collateral utilization rate at 100%. You are asking to be liquidated!
- The Health Factor can change if the price of the underlying assets change to a great degree. We recommend users monitor their Health Factor from time to time, especially if there are rapid changes in market conditions.
4. Submit and approve the transaction
How to Manage Your Assets
Access “Portfolio” in the menu to view and manage your Deposited and Borrowed assets.
Your “Net APY” is your total APY (annual percentage yield) which calculates how much you are earning from depositing assets (deposit APY) minus how much you owe the protocol from borrowing (borrow APY).
Choose the asset you want to withdraw and click “Withdraw.”
If you want to withdraw all your assets, make sure to repay your debt first. If withdrawing at 100% doesn’t work, lower to 99% or so and try again.
If you are withdrawing only a portion of your assets and maintaining your debt position, beware of how this will change the Health Factor and manage your liquidation risk.
On Burrow, you can customize the rate at which your assets are collateralized, and set it differently for each asset you supply. This is different from previous lending protocols whose collateral rates were set at a default rate.
You can set the desired collateralization rate when you first deposit your assets, or go to “Portfolio” and click “Adjust Collateral.”
To pay off your outstanding debt, go to the “Portfolio” section and click the “Repay” button.
Deposit NEAR, Repay with wNEAR?
Due to the difference in token standards, Burrow (and most other DeFi dapps on NEAR) use wNEAR (“wrapped” NEAR), not NEAR.
When you deposit, your NEAR will be automatically wrapped, so there is nothing you need to do. However, if you borrowed $wNEAR and are looking to repay, you have to do it as wNEAR. Use the Ref Finance Wrapping Page to wrap your NEAR into wNEAR first.
In the future, Burrow will support direct wrap/unwrap on the app itself. Furthermore, the wrap/unwrap function will be integrated to the NEAR wallet so that this issue is more easily resolved.
To read on the difference between wNEAR and NEAR, see our FAQ.
Coming Soon: xBRRR Staking!
Shortly, staking will go live on Burrow. Users can stake their BRRR and receive xBRRR, with which they can access boosted rewards and participate in protocol governance. Stay tuned!