# Borrowing Mutuum’s Stablecoin

Borrowing Mutuum’s stablecoin essentially involves generating fresh tokens within the protocol’s lending process. A user must provide collateral above a specified ratio, just as they would when borrowing any other asset, but rather than needing someone else to supply the stablecoin, the protocol creates it on demand through its approved Issuers. Because these tokens are overcollateralized, the value of the borrowed stablecoin is secured by collateral worth more than the stablecoin’s nominal amount. This approach protects against price swings in the underlying collateral during periods of volatility.

When a user borrows Mutuum’s stablecoin, both the newly created stablecoins and corresponding debt tokens are transferred to the user. Over time, the debt may grow slightly due to accrued interest. If the requested amount exceeds an Issuer’s current capacity, the borrow transaction will fail. In addition, standard risk controls apply: changes in collateral price can reduce the user’s stability factor, and if it dips below 1, liquidation of the collateral may occur.

For instance, imagine a user deposits 1 ETH into Mutuum as collateral and receives a deposit token (like mtETH) in return. The user then mints 100 units of Mutuum’s stablecoin, effectively borrowing against their ETH. In this scenario, the user also receives a debt token signifying the borrowed amount. After some time, the debt could accrue interest, so the borrower might see it become 100.0000012 stablecoin units instead of exactly 100. As with any borrowed position in Mutuum, the user’s stability factor will fluctuate with market conditions - if the collateral’s price falls and the stability factor drops too low, a liquidation event could occur to maintain protocol solvency.


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