Creditify Protocol: A Step-by-Step Guide

Creditify is a decentralized crypto lending protocol on the XDC Network that lets anyone lend or borrow digital assets through smart contracts (no banks or middlemen). You can supply supported tokens (like XDC, USDC, etc.) to earn interest or borrow other tokens by posting collateral. All operations run on trustless smart contracts transactions are “peer-to-protocol” with no central authority. (Note: Creditify is now live on XDC’s Apothem testnet at https://creditify.co/dashboard the full mainnet launch is expected soon)

Supplying Crypto to Earn Interest

When you supply a token to Creditify, you deposit it into a shared liquidity pool and immediately start earning interest on it. The protocol mints interest-bearing cTokens (for example, you get cXDC when supplying XDC) that represent your share of the pool. Each cToken’s value grows over time as interest accrues — in other words, holding 1 cXDC can be redeemed for more XDC later. As Compound’s docs explain, “by minting cTokens, users earn interest through the cToken’s exchange rate”.

Interest rates are variable and set by supply-and-demand. If the pool is large (lots of unused tokens), rates stay low; if demand is high (most tokens are borrowed), rates rise. This floating rate model ensures the pool balances naturally: lenders earn more interest when liquidity is scarce and less when it’s abundant. Importantly, you can withdraw your supplied funds at any time (so long as there’s enough liquidity in the pool), by redeeming your cTokens for the underlying asset.

To supply tokens on Creditify:

1. Connect your wallet. Click “Connect Wallet” on the Creditify app and choose your XDC-compatible wallet (e.g. MetaMask configured for XDC). Ensure you are on the XDC network (Apothem for testing or Mainnet when live).

2. Select an asset to supply. On the dashboard, go to the Supply (or “Assets to Supply”) section. Choose a supported token (such as XDC or USDC) from the list, enter the amount you wish to deposit, then click “Supply.”

3. Approve and confirm. Your wallet will prompt you to approve spending that token. After approval, confirm the supply transaction. The tokens will be sent into the pool.

4. Receive cTokens. In exchange, you’ll receive interest-bearing cTokens (for example, cXDC) in your wallet, equal to your deposit amount divided by the current cToken exchange rate. These cTokens automatically accrue interest — simply holding them increases your claim on underlying tokens over time.

5. Earn interest. From this moment on, your supplied tokens earn interest. The rate updates in real-time based on how much of the pool is being borrowed. You can track earned interest in your cToken balance.

6. Withdraw anytime. Whenever you want to exit, redeem your cTokens back for the underlying asset (plus interest). For example, to withdraw, select the asset in Redeem and specify how many cTokens to redeem. The protocol will burn your cTokens and transfer you the corresponding principal plus earned interest.

Borrowing Against Collateral

To borrow on Creditify, you must first have supplied assets as collateral. Loans are overcollateralized, meaning you can only borrow up to a certain percentage of your collateral’s value. Each asset has a fixed Loan-to-Value (LTV) ratio (also called collateral factor) set by the protocol. For example, if XDC’s LTV is 75%, supplying $100 worth of XDC lets you borrow up to $75 of other tokens.

Borrowed funds begin accruing interest immediately. You pay interest on the borrowed tokens (just as the pool’s lenders earn interest) at a rate that also fluctuates with market demand. As with a bank loan, failure to repay interest or principal can be risky. If your collateral’s value falls such that your loan exceeds the allowed LTV, your position becomes “underwater” and may be liquidated. In other words, other users can liquidate your loan if your collateral value drops too close to the borrowed value. They would repay your debt on-chain and seize a portion of your collateral (with a small bonus incentive).

To borrow on Creditify:

1. Ensure you have collateral supplied. Before borrowing, supply enough tokens (see steps above) so that you have collateral in your account. Check the dashboard to see your maximum borrow limit (based on your collateral’s total value and the asset’s LTV ratio).

2. Navigate to the Borrow page. In the dashboard, click on Assets to Borrow. This lists all tokens you can borrow, along with their current interest rates and your available borrowing power.

3. Select a token and amount. Choose the cryptocurrency you want to borrow. Enter the amount — it must be at or below your available limit (for example, if you have $150 collateral at 75% LTV, you can borrow up to $112.50).

4. Confirm the borrow. Click “Borrow” and approve the transaction in your wallet. The borrowed tokens will be transferred to your wallet balance, and your borrowed balance will start accruing interest immediately.

5. Monitor your collateral ratio. The dashboard shows a Health Factor or collateral ratio indicator. Keep this well above 1 to stay safe. If it falls too low, repay or add collateral promptly to avoid liquidation. Otherwise, any user can liquidate part of your loan.

6. Repay to unlock collateral. When you’re ready, go to the Repay section. Choose the borrowed asset, approve the token spend, and repay the principal plus any accrued interest. Once fully repaid, your collateral is released and you can withdraw it.

Managing Your Position

● Interest Accrual: On borrowed tokens, interest accumulates in real time (shown in the dashboard). On supplied tokens, interest increases your cToken value over time. Check the interest rates regularly, as they adjust with supply/demand.

● Health Factor: Your health factor (or safety ratio) is calculated from your collateral vs. borrow value. Keep it comfortably above 1.0. If it drops below 1.0, your loan is under-collateralized and open to liquidation by others.

● Liquidation Warning: As Compound’s documentation notes, “a user who has negative account liquidity is subject to liquidation by other users”. In practice, this means if your collateral value drops (due to market moves) so that your borrow exceeds the allowed LTV, the protocol will allow liquidators to repay a portion of your debt in exchange for collateral. Always ensure you have a buffer.

● Withdrawals: You may withdraw any portion of your supplied funds (and interest) as long as it does not compromise your collateral requirements for existing loans. Use the Withdraw/Redeem function on the dashboard for this.

● Gas Fees: Remember to keep a small XDC balance in your wallet for gas fees on XDC Network transactions. XDC fees are very low (a tiny fraction of a token), but you still need some XDC to perform actions.

By following these steps — connecting your wallet, supplying tokens, and borrowing against collateral — you can use Creditify just like any other DeFi lending platform. All transactions are secured by smart contracts, and you always maintain control of your assets. With Creditify moving to mainnet soon, this guide should help you get ready: first experiment on testnet, then repeat the same flow when mainnet goes live.

Disclaimer

This content is for informational purposes only and not financial, legal, or investment advice. Creditify Protocol is a fully decentralized, non-custodial platform powered solely by smart contracts, with no central authority or guarantees, and all on-chain transactions are irreversible.

Cryptocurrencies are high-risk and volatile. Users may incur losses due to market movements, liquidations, or smart contract and network risks. Use DeFi at your own risk and always DYOR