Overview

Brief summary of Archi Bank.

What is Archi Bank?

Archi Bank is a DeFi service that deposits Ethereum crypto assets (hereafter assets) and pays interest, or gives out loans with the deposited assets as collateral and pays interest on the loan.

Advantage

There is no need to open an account with Archi Bank. Anyone with an Ethereum account can use Archi Bank.

In Archi Bank, the interest on deposits generates compound interest every block (about 20 seconds), so even a deposit for a very short time generates income.

In Ethereum, gas fees are incurred from deposits and withdrawals. Therefore, if you have a deposit that you cannot afford to pay for the gas fee, and if you are within the deposit period, you may incur losses due to gas fees that exceed the interest income.

As long as you have deposit collateral, you can get as many loans and repay them as you want without anyone's intervention or censorship

Archi Bank has no branches and no employees. Thus, most of the costs and profits of existing centralized banks are returned to depositors and borrowers as income.

Unlike wallets or exchanges that only store assets, Archi Bank allows you to earn deposit interest. In addition, you can earn additional income by participating in interest farming through the Cripto Archi Finance’s staking service.

Archi Bank is powered by smart contracts on the Ethereum blockchain. It is impossible to change any function during operation since Archi Bank's smart contract is not upgradeable.

• Unless liquidation conditions are met, no one except the user can access the their assets. Although the Cripto Archi Finance contract distribution accounts and Governance activation may cause services to be disrupted by Governance contracts, it cannot prevent the withdrawal of user deposited assets.

• The service cannot be terminated unless the Ethereum blockchain network disappears from the planet. Even if Cripto Archi Finance disappears, anyone can create a client UI and restart the service.

• The execution of functions according to the user’s transaction approval is executed as promised in the smart contract. No additional manipulation is possible in the future.

Risk

If you deposit or borrow a highly volatile crypto asset (cryptocurrency), you may incur losses. If the price of a deposit asset falls, you may incur losses that are at the level of being meaningless. If the price of a deposit asset rises, you may incur losses due to the liquidation of deposit collaterals.

Investors seeking stability are advised to deposit with stablecoins from the start or by converting volatile assets into stablecoins. In this way, you can get a high stable interest rate without losing principal, and you can also get the secondary advantage of investing in dollars.

Archi Bank is a service executed by smart contracts distributed on the non-updateable Ethereum blockchain and may be vulnerable to distributed smart contracts which may be used to steal assets. In this case, the depositor bears all the losses because there is no entity responsible for the stolen assets like centralized banks.

As a service that forked smart contracts of Compound and Inverse Finance—which has been in operation for over 1 year—risk of having deposits stolen is close to zero. However—since there is a possible risk— users who deposit large amounts of money should be cautious regardless of the validation or opinion of the community that distributed the contract.

If you are a user seeking stability, it is recommended that you make a deposit after a certain amount of the total deposit has been operated without incident for some time. This is because hackers will go crazy even for 100 million KRW if the contract is vulnerable to asset theft. The DeFi service cannot be trusted through external audits or guarantees—it is wise to trust it after seeing the scale of the operating funds and how long it has been in operation after the smart contract was released. The period is especially important.

Deposits may not be able to be withdrawn due to a lack of liquidity. For example, if you deposit 10 Ether but your deposit asset liquidity is only 5 due to a loan, you will not be able to withdraw the 5 Ether until the loan is repaid. Such cases—of course—are not easy to come across as in the early stages of service or when a large-scale withdrawal occurs.

Utilization Rate

The utilization rate is the ratio of an asset to a deposit. Deposits are categorized as loans and non-loans. The part that is not loaned is called liquidity (Cash) in Archi Bank, meaning that it can be used for loans.

Since deposits include interest, and a portion of the interest becomes a reserve, you must subtract the reserve when calculating the utilization rate.

Archi Bank calculates the utilization rate as follows.

Loan / (Liquidity + Loan - Reserve)

Archi Bank's interest rate is a variable interest rate that changes according to the utilization rate. Therefore, your interest rate will be affected by other people's deposits and loans

Reserves

The reserve is set at 10% of the interest rate—equivalent to the protocol fee. This is called the reserve ratio. The reserve is used for the operation of Archi Bank according to Governance decisions.

The reserve is usually set between 8% and 20% in Compound for Inverse Finance.

Even though it can be changed, it should not exceed a maximum of 20%. Changes will be implemented after notifying the community for at least one week.

Collateral Factor, Collateral Value, Borrowing Limit

The collateral factor—also called the loan-to-value ratio—is the ratio of how much of the collateral value will be recognized as the loanable value. In other words, the collateral value determined by the collateral factor becomes the borrowing limit.

For example, if the collateral value is 1 million KRW and the collateral factor is 60%, the maximum borrowing limit for this asset is 600,000 KRW.

The collateral factor factor is set differently depending on the nature of the asset and its volatility and stability.

The collateral factor of Archi Dollars (ARCD) is 70%, ETH 60% and CAT 40%.

It may change depending on the degree of stability of the asset. For example, if the stability of CAT increases, it increases to 50%. Changes will be implemented after notifying the community for at least one week.

Utilization of Borrowing Limit, Utilization of Maximum Borrowing Limit.

The utilization indicates the ratio of the borrowed amount to the collateral value.

For example, if the collateral value is 1 million KRW and the collateral factor is 60%, the utilization is 10% if the borrowed amount is 600,000 KRW. If the utilization of the borrowing limit exceeds 100%, it is subject to liquidation.

Archi Bank places a limit so that it is not subject to liquidation due to non-performing loans. The current maximum borrowing limit is 90%.

If the utilization rate exceeds the maximum limit, you will not be able to receive additional loans from the Cripto Archi Finance UI.

Since there are no such restrictions in contracts, you can get additional loans if you execute the contract yourself. It is important to note that it may become insolvent and may be subject to liquidation in this case.

Liquidity Incentives, Liquidity Ratios

Archi Bank is a decentralized lending service with no central entity to liquidate. Incentives are used for motivation when there is no central entity, but actions have to be carried out by someone. Liquidation is one of these actions.

Archi Bank provides incentives for liquidation by allowing foreclosure of collateral assets at a 10% discount. Anyone can liquidate non-performing loans.

The liquidation rate is what percentage of a non-performing loans is allowed to be liquidated.

Liquidation may not be carried out properly at a low liquidation rate since the amount of loan is small in the beginning.

Archi Bank has set the initial liquidation rate to 100%. This means you can pay off the entire loan at once for non-performing loans. Of course—since only one collateral asset can be foreclosed at the time of liquidation—you need more collateral assets to be able to liquidate 100% of the loan.

The liquidation rate may change if the asset specific deposits increase. The liquidation rate is usually set at 50% for Compound and 100% for Inverse Finance.

Changes to liquidation incentives and liquidation rates will be implemented after notifying the community for at least one week.

Since it can be based on a single loan asset and collateral asset—setting multiple assets as collateral can prevent 100% of the loan from being liquidated in case of insolvency. For example—if you have an ETH loan worth 1 million KRW and CAT collateral worth 2 million KRW—the ETH loan will be liquidated with a CAT collateral of 1.1 million KRW if insolvency occurs. Even if it is the same loan—if the CAT collateral is 500,000 KRW, ETH is 500,000 KRW, and ARCH is 500,000 KRW—the loan can only be liquidated for up to 500,000 KRW as collateral.

Asset Price

Archi Dollars (ARCD) uses a fixed price of $1.

ETH uses Chainlink’s price—the representative price provider oracle.

CAT uses Archi Swap’s time-weighted average price.

Archi Bank uses an independent pricing oracle contract for CAT.

The price oracle takes the time-weighted average of Archi Swap’s ETH/CAT pool per update cycle and sets it as the starting price.

When calculating the present price of CAT through price oracle, the time-weighted average value of the ETH/CAT pool is set as the closing price.

Price oracle calculates the time difference between the open and closing prices and obtains the time-weighted average to provide the current price of CAT.

The update cycle of Archi Bank’s price oracle is 3 days.