Interest Bearing Token (iToken)

Foundation of Cross-Margin Lending Market

Each token supported in Pawnfi Cross-Margin Lending Market is integrated through a separate iToken contract, which is an EIP-20 subsidiary that represents balances supplied to the protocol. By minting iTokens, users (1) earn interest through the iToken's exchange rate, which increases in value subject to the underlying token, and (2) gain the ability to use iTokens as collateral.

iTokens, which stand for "Interest Bearing Tokens", are derivatives of an underlying token and also the primary means of interacting with the Pawnfi Protocol; when a user supplies, redeems, borrows, repays, liquidates, or transfers iTokens, he/ she is actually interacting with the iToken contract.

How do iTokens earn interest?

Each token market has its own Supply interest rate (APY). Interest will not be directly distributed to users' accounts; instead, it will be accrued to the amount of iToken held by users.

iTokens accrues interest through their exchange rate — over time, each iToken becomes convertible into an increasing amount of its underlying token, even while the amount of iTokens in your wallet stays the same. Please note: each user has the same iToken exchange rate for the same underlying token.

For example, when a token market (ex. ETH) is launched, the iToken exchange rate (how much ETH one iETH is worth) begins at 1 — and increases at a rate equal to the compounding market interest rate. For example, after one year, the exchange rate might equal to 1.01415.

How to view my iTokens?

While Pawnfi front end only displays your supplied/ borrowed tokens, iTokens will be visible on Etherscan, and you should be able to view them in the list of tokens associated with your address.

iToken balance has been integrated into multiple web3 browser wallets. You can easily check the balance on MetaMask, Coinbase Wallet and so forth.

Can I transfer iTokens?

Yes but, please note that transferring iTokens means you’re transferring your balance of the underlying token inside the Pawnfi protocol. That is, sending an iToken to others will decrease your balance (supplied amount) , and the recipient will see his/ her balance increase.

An iToken transfer will fail if you have borrowings against the underlying token and the transfer would have put the account into a state of negative liquidity.

iToken Staking

There is an active mining design that iToken holders can stake them in corresponding gauge pools to mine $PAWN rewards. Please see more details in Incentive Mechanism.

However, please keep in mind the following:

  1. Staking iToken does not guarantee incentives - the final distribution will be based on Gauge Voting and Gauge Weight. Please see more details in Gauge Voting.

  2. Staking iToken will lower borrow limit, increasing borrow limit used. Please manage your own risk accordingly when you are a borrower (borrower will also receive iToken when supplying tokens as collaterals).

  3. Staking iToken will temporarily decrease supply balance on your position (that is why your borrow limit will be lowered). However, you are still earning interest through the iToken's exchange rate, which increases in value dependent on the underlying token. Overall, staking iToken WILL NOT lower your interest income as a supplier.

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