Collateral

Different parameters will be set for each asset based on its specific risk profile. Assets with high liquidity, such as stablecoins and ETH, will have a higher loan-to-value (LTV) ratio, which means that users can borrow a larger percentage of their value.

The liquidation threshold, which is the point at which a loan is considered unhealthy and may be subject to liquidation, is always higher than the LTV. This ensures that healthy loans are not liquidated unnecessarily.

To encourage other users to liquidate unhealthy loans and protect the protocol, a liquidation fee is charged to the user's collateral. A portion of this fee is also placed in the treasury to protect against insolvency in volatile market conditions.

In order to limit the potential for bad debt, the supply of certain assets may be capped.