Loans

Cobuild loans don't have a floating APR. They're fixed-fee loans with a tunable fee-free window and a hard 10-year limit.

The upfront payment (the source fee) is configurable. It determines the interest-free period. After that period, an additional time-based source fee ramps up until a cap, and after 10 years the loan can no longer be repaid (it's administratively liquidated).

How It Works

High-level:

• Tokens are used as collateral to borrow the base asset from the treasury instead of cashing out.
• The collateral is burned at origination.
• The maximum borrowable amount before fees is the cash-out value of that collateral on the bonding curve.
• After protocol / REV / source fees, the participant receives a percentage of the cash-out value:
  • Short window (~6 months) → ~94%
  • Max window (10 years) → ~63%

So the participant is effectively accessing liquidity at a discount to the cash-out value, with the option to restore their position later by repaying the loan.

On repayment:

• The participant chooses how much collateral to restore.
• That fraction of the original collateral is reminted, and the loan obligation shrinks accordingly.
• Full repayment before the 10-year deadline restores all collateral.
• After 10 years, the loan can be liquidated: accounting is updated, collateral remains burned, and the treasury stays solvent.

A loan ≈ "access liquidity at a discount today, while preserving the option to restore the original token balance later at (roughly) today's floor price, plus a fixed fee."

Fee Layers

When a loan is originated, three fees are deducted from the loan amount immediately:

After fees, the participant receives:

• Short window (~6 months) → ~94% of the cash-out value
• Max window (10 years) → ~63% of the cash-out value

• Protocol + REV + smallest source fee
• ≈ 2.4% + 1.0% + 2.4% ≈ 5.9% of the amount borrowed

Prepaid Duration

The chosen source fee determines the fee-free repayment window:

• A time-based source fee starts accruing.
• It ramps up smoothly from 0 and, at the 10-year limit, can add up to ~50% of the un-prepaid portion of the loan as extra source fee.
• For typical configurations, total source fees over 10 years fall in the 50–65% of principal range, depending on the initial prepayment amount.

There is no compounding APR. The structure is:

upfront % → X years of "no additional interest" → after that a growing late fee accrues, capped by the 10-year limit.

Cost by Horizon

A property of the fee formulas:

For a given repayment horizon T, the minimum-cost configuration is always "prepay exactly T years". Under-prepaying and repaying late is strictly more expensive.

Key horizons, assuming repayment by the end of the prepaid window:

5-Year Loan

• ~20% source fee → 5-year fee-free window.
• Total one-time cost (protocol + REV + source): ≈ 2.4% + 1.0% + 20% ≈ 23–24% of the amount borrowed.
• Simple average over 5 years: ~4.7%/yr (non-compounding).

10-Year Loan

• ~33% source fee → 10-year fee-free window.
• Total one-time cost (protocol + REV + source): ≈ 2.4% + 1.0% + 33.3% ≈ ~36–37% of the amount borrowed.
• Simple average over 10 years: ~3.7%/yr.

Under-Prepaying

Example: a 6-month prepay (~2.4% source fee) with actual repayment 5 years later:

• Total cost on that 5-year horizon ≈ 37% of principal (vs ~23–24% with a 5-year prepay).
• Simple average: ~7.4%/yr.

A 6-month prepay extended to the 10-year limit results in ≈ 55% total cost of principal.

The mechanism is designed such that:

Matching the prepaid window to the actual repayment horizon minimizes total fees. Under-prepaying and repaying late always costs more in total percentage terms.

Loan Use Cases

The loan mechanism serves several practical purposes:

• Working capital: Builders who need liquidity for operations without permanently reducing their position.
• Bridging timing gaps: When a participant expects future income but needs funds now.
• Maintaining alignment: Accessing liquidity while preserving the option to restore one's original token balance later.

The fixed-fee structure makes costs predictable—participants know the total cost at origination rather than facing variable rate uncertainty.

10-Year Mechanism Properties

With the max-prepay 10-year configuration:

• The participant pays ~36–37% of the cash-out value of their collateral as a one-time fee, in exchange for 10 years of liquidity.
• The mechanism preserves:
  • The option to restore the original token balance at any point before the deadline.
  • The repayment amount is fixed at origination—it does not change if the floor moves.

This design allows long-duration liquidity access while keeping costs bounded and predictable.

Rolling Loans

Participants can refinance, but cannot reuse the same collateral twice:

• Collateral is burned and tied to a specific loan until repayment or default.
• To open a new loan:
  • Repay the existing loan,
  • Collateral is reminted,
  • A new loan can then be opened at the current floor.

Each cycle:

• Incurs a fresh set of fees.
• Reduces the participant's net token position over time.

The loan → repay → loan pattern allows participants to access liquidity across multiple periods while maintaining their token balance.

TL;DR

• No floating APR; a front-loaded fee determines the fee-free repayment window (up to 10 years).
• Protocol + REV fees total ~3.4% on top of the chosen source fee.
• When prepay matches horizon and repayment is on time:
  • ~6-month: ~6% total cost.
  • 5-year: ~23–24% total (~4.7%/yr simple).
  • 10-year: ~36–37% total (~3.7%/yr simple).
• Under-prepaying with late repayment increases total cost (e.g. 6-month prepay with 5-year repay → ~37% total; 6-month prepay extended to 10 years → ~55% total).
• No compounding interest and no unbounded debt growth; everything is bounded by the 10-year design.

All percentages are of the amount borrowed and exclude gas and token price volatility; rounded for clarity, but the structure matches the cobuild math.