The system creates in the background always a credit line during the first loan. When borrowing a second time, the existing credit line is used.
The borrower can have different types of collateral in one credit line and multiple loans via his credit line. If the borrower’s loan is liquidated, then the remaining funds are transferred into the borrower’s credit line.
The borrower can:
Borrow again and again against unallocated collateral in the credit line.
Withdraw unallocated collateral (i.e., collateral that is not used for active loans) at any time.
Increase the collateral ratios of the active loans.
Add more collateral assets into his credit line.
Borrower needs to pay gas (ETH) for the transactions:
By the first loan for creating a credit line
By depositing collateral
By paying back the loan
If borrower has already collateral in the credit-line, then he can create new loan requests without the gas payment. In this scenario, he needs to pay gas only by paying back the loan, which means significant gas savings for the borrower.
SmartCredit.io does not re-hypo the collateral. The collateral is locked in the credit lines; it’s “out of circulation”.
There are four types of credit lines:
ERC20-ERC20 is for borrowing ERC20 assets against ERC20 collateral.
ERC20-ETH is for borrowing ERC20 assets against ETH collateral.
ETH-ERC20 is for borrowing ETH against ERC20 collateral.
ETH-ETH is for borrowing ETH against ETH (in case someone wants to do this).
A credit line is always created together with the first borrowing transaction and will be used in all following borrowing transactions. The assets in the credit line can be continuously re-used. It's like collateralized line of credit in the traditional finance.