What is Ambit Finance?

Ambit is a new breed of cross-chain DeFi protocol which offers a range of functionality to users, from simple yield creation on stablecoin deposits, to sustainable money market lending and risk-defined portfolio investment strategies - all within a user friendly environment. Ambit's “North Star” is to provide a user experience that is well beyond the ambit of what exists in DeFi today.

The Ambit protocol allows users to stay on-chain with exposure to sustainable yields being produced from borrowing demand and yield creation strategies with idle capital. Ambit drives deposit and borrowing demand through the use of innovative DeFi investment strategies and vaults.

How it works

Stablecoin deposits

At the Heart of the Ambit protocol is the USDT vault. Users can deposit USDT into the Ambit vault to receive a share of the protocol yield. This vault is used by approved borrowers who will pay interest for borrowing from the vault.

When a user deposits USDT, they receive AUSD, tokenized representation of a user's share of the USDT vault. Over time, AUSD grows in value based on the yield generated from borrowing interest.

The AUSD token is a fully compliant, fungible ERC20 token that allows a depositor's liquidity to remain unlocked and usable within other DeFi protocols to further enhance yield exposure.

To learn how to deposit USDT in ambit, visit the Deposit guide.

Portfolio and borrowing

On the other side of the Ambit protocol are the borrowers. These users deposit various approved assets into their Ambit portfolio. Based on the value of their portfolios, users can borrow USDT from the Ambit vault. A dynamic interest rate is applied to the borrowed funds, and the funds are distributed to the holders of AUSD.

Unlike traditional borrowing and lending protocols, Ambit does not require users to lock up their collateral or borrow against single assets. Instead, users remain fully in control of their portfolios. At any time, a user can withdraw or deposit different assets into their portfolio, provided their borrowing health is in good standing. Instead of taking each asset as individual borrowing collateral, Ambit looks at the full range of assets in a user's portfolio, and creates a health score based on the value of the assets.

Isolated Collateral

When a user wishes to borrow from a money market they need to provide collateral to secure their borrowing position. A traditional two-sided money market would then lend out that collateral to borrowers which presents liquidity risks to both the protocol and the depositor. With Ambit’s approach, a user's assets are only used within the confines of their own portfolio and are not available for other users to borrow. Isolated collateral allows Ambit to alleviate risk and be more secure than traditional lending systems.

Borrowing health

The amount of USDT users can borrow is based on the value of their portfolios and their borrowing health. The Borrowing Limit determines how much USDT they can borrow based on their current portfolio. A user's Health Score is a number out of 1000 that represents a user's outstanding liabilities vs their portfolio value. Higher scores indicate good borrowing health, lower scores indicate poor borrowing health. Users can repay their borrowed USDT amounts to decrease their liabilities and raise their borrowing score.

Users can freely withdraw and use assets in their portfolio, as long as their borrowing health remains in good standing. If a borrower's health score gets too low, their portfolio value can no longer be withdrawn, as their portfolio needs to have enough value to cover a portion of their outstanding liabilities. If a user does not monitor their borrowing health carefully, they risk their portfolio getting liquidated by the protocol in order to maintain collateral balances.

Interest and yield

Borrowers are charged a dynamic interest rate based on the utilization of the USDT Vault. This interest is passed back to the USDT Vault in the form of yield to the depositors.

Traditional money markets allow users to borrow assets, but that's where their interaction ends. Ambit Finance drives borrowing demand by providing users innovative DeFi investment strategies, enabling them to grow their portfolio with borrowed funds. Depending on the user risk profile, investment strategies can be geared around leveraged borrowing which comes with a premium on interest rates.