Collateralization Requirements

Over-Collateralization

Borrowers must lock collateral worth more than the borrowed amount to protect the protocol against default.

• Example: If the collateralization ratio is 150%, a user borrowing $100 must lock $150 worth of collateral.

Dynamic Collateralization

The required ratio varies depending on the asset's volatility:

• Stablecoins may have lower collateralization ratios due to reduced volatility.

• Volatile Assets require higher collateralization ratios to mitigate risk.

Borrower Evaluation

The protocol assesses borrowers using:

• Historical data

• Credit scoring

• Behavior analysis

This ensures appropriate lending terms and collateral requirements.

Risk-Based Parameters

Lending parameters, such as loan-to-value (LTV) ratios and interest rates, are customized based on individual borrower risk profiles. This promotes responsible borrowing and reduces default risks.