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title: Infinite Banking with Resupply

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![image](https://hackmd.io/_uploads/rkGtV6mrJx.png)

**What is Infinite Banking?**
Popularized by insurance agents/wealth managers peddling whole life insurance policies to boomers in TradFi, the concept of "Infinite Banking" boils down to taking advantage of the cash value growth and borrowing against that money.

**Enter Resupply**
A key feature of Resupply is that **the borrow rate will always be half of the lending rate** (with a few caveats we will get into later in the "Borrow Fee Rate" section below). This means that if, for example, sfrxUSD yields 10%, Resupply will charge you 5%. Because of this easy arb, **the collateral is always working for you and growing**.

**Infinite Banking**
And thus, with this most simplistic example, we have infinite banking. If you are prudent and only borrow enough reUSD such that you aren't diluting the Principal from growth, you can then repeat ad infinitum.

![9ehvuk](https://hackmd.io/_uploads/SkPkuJ4Hyx.jpg)

**Free Money Glitch???**
But wait, Aisha, we've heard this many times before. CryptoMessiah borrowed MIM to buy his manshun and planned to use the yields to pay for the mortgage in 2021! And that TikTok kid planned to use the 20% APY from UST to do the same thing in 2022! We've tried this before many times!

**The Resupply Mechanism does not rely on $RSUP**
Here, we are simply borrowing stables from stables and reUSD peg follows a redemption mechanism. It is not mint and burn/etc.

**What can I do with reUSD?**
There  are two main supply sinks for reUSD: the Insurance Pool and the Liquidity Pool(s)  ("LP"). Those who supply reUSD to the Insurance Pool will earn RSUP emissions, reUSD from protocol fees, as well as crvUSD/frxUSD from any liquidations. The protocol has allocated 25% of RSUP emissions to the Insurance Pool and 50% as Voting Incentives to thicken reUSD LPs.  Quite lucrative!

**Clarifications RE The Insurance Pool**
At first glance, liquidations may appear to be a risk for users supplying their reUSD to the Insurance Pool. However, this is not a risk because you get paid every time a liquidation happens. On the other hand, if the system incurs bad debt, your reUSD will be used to cover the bad debt, meaning you will be buying the bad debt at full price.

**All Hands on Deck**
It's a bit too early to tell, but users should be aware of two main factors throughout the course of their Infinite Banking journey!
* Redemptions
* Be Hands On and Manage your Position!

![9ehw7u](https://hackmd.io/_uploads/HkNg51VBkx.jpg)


**Redemptions**
It will likely be guaranteed that you will encounter a handful of redemptions as you settle into the rhythm of Infinite Banking. Do not fear it! The docs provide a clear example of this here: https://docs.resupply.fi/resupply-protocol/stability-mechanics

Essentially it's an arb to restore the reUSD peg but as the borrower you have collateral removed. Redemptions are socialized across the entire lending pool and half of the redemption fee will be used to pay back more of your debt.

**Borrow Fee Rate**
To be most exact, "the borrow rate for reUSD will be set at half the underlying lending fee rate, *half the "risk-free rate,"  or two percent, whichever is greater*". Let's explore that last bit further.

During times of Quantitative Easing ("QE") when the FED is printing money and buying up assets, you can expect interests rates to be low, and during times of Quantitatve Tightening ("QT") you can expect interest rates to be higher, as we are experiencing now. Let's explore both scenarios.
* QE
    * Let's assume that LlamaLend is 0% lending rate. Let's further assume that the risk free interest rate during QE falls to 1%. This would mean that the borrow rate is 2%, since 2% is greater than the risk free rate of 1%.
    * The reality is that in a QE environment, with basically 99% of DeFi relying on brrtokenomics, it will be very easy to find APY to cover your borrow rate of 2%.
* QT
    * In a QT environment, interests rates will be higher. We are living through it now. We will simply farm the FED as we are doing now with RWA/Treasuries.

TLDR, ***Resupply will be a one stop shop to park your stables regardless of the market environment!!***
![9ehwb6](https://hackmd.io/_uploads/rk3OcJVBJl.jpg)


**Scaling TVL**
With most LPs, as folks pile in, obviously the APY goes down. With Resupply, as TVL increases, it will similarly dilute Resupply and therefore Llamalend as well. This will cause APY on lending to go down. Let's assume it drives lending to 0% APY.

If APY were 0%, new borrowers will step in, creating a seesaw mechanic as the TVL increases.

**Predictable and Modest Fees**
Because of Resupply's **predictable and modest fees**, it is very easy to manage your position and you can anticipate and plan for any potential headwinds which may blow your way! 

![9ehw38](https://hackmd.io/_uploads/S1U4t1NB1x.jpg)


Thank you for reading! I am sure you have some burning questions!

Resupply has not yet launched as of this writing, but the docs are live! There are also links to the Discord and the Twitter on the Resupply site: www.resupply.fi