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papr = perpetual APR
The CONTRACT uses MARKET PRICE to determine INTEREST owed by BORROWERS, which is paid in the form of appreciation in the price of papr tokens.
This impacts SUPPLY and DEMAND and the price of papr on UNISWAP, forming a perpetual feedback loop for discovering the optimal APR for loans.
Wait, how does papr work exactly?
How are interest rates set?
Papr interest rates and the papr trading price are in a constant feedback loop. Interest rates are programmatically updated on chain as a function of papr's trading price on Uniswap (the lower the trading price, the higher the interest to borrowers), and interest rates in turn affect the trading price, as borrowers ope
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How is interest paid?
Interest accrues to the value of papr itself: over time, new borrowers are allowed less papr for the exact same collateral. When closing a loan, borrowers repay the exact same amount of papr that they minted. However, due to interest charges, it is expected that the market value of papr will have risen since they opened their loan.
What’s the benefit of doing this with a token?
As a token, papr is traded external to the protocol. This means its price can incorporate external forces or new information in the market, accurately reflecting the sentiment of the market in real time. In this way, the market price of papr discovers the interest rate for loans that perfectly balances borrower's demand for loans and lenders' willingness to provide capital.
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How do liquidations happen?
Loans have a max LTV of 50%. That means that the total debt owed — the principal plus interest — cannot exceed 50% of the collateral NFT's floor value. This is calculated based on the 30-day time-weighted average floor listing, which can change over the life of a loan.
Borrowers are free to borrow any amount up to the Max, but the higher the amount, the less room there is for the loan to accumulate interest before coming due, and less tolerance for the value of the collateral NFT falling. If loan
