Loan to Value and Liquidation Threshold
Lending is known to be a financial risk product, particularly in the cryptocurrency space where prices are highly volatile. The Collateral Debt Position (hereinafter referred to as CDP) generated by the DeXian Lending Protocol represents one such risk unit, encapsulating key data on the borrower’s collateral, debt, and other relevant information.
debt_token.price = $price_oracle.get_price($debt_token)
collateral_token.price = $price_oracle.get_price($collateral_token)
LTV(Loan to Value) = ($debt_token.borrow_amount * $debt_token.price) / $collateral_token.amount * $collateral_token.price
Upon creating a CDP, the Loan to Value (LTV) represents the maximum borrowing ratio accessible to a borrower. However, as the prices of the debt token and collateral token fluctuate, the LTV and, consequently, the health of the CDP, undergo changes. Each collateralized asset is assigned a Liquidation Threshold.
CDP.health_factor = ($collateral_token.amount * $collateral_token.price * $collateral_token.liquidation_threshold) / ($debt_token.borrow_amount * $debt_token.price)
Asset Risk Parameter
The liquidation process is initiated when the CDP.health_factor falls below 1. The current parameter configurations for the assets supported by DeXian Lending are as follows:
| Symbol | Collateral | Loan To Value | Liquidation Threshold | Liquidation Bonus | Insurance Ratio | Interest Model |
|---|---|---|---|---|---|---|
| XRD | Yes | 60% | 70% | 7% | 25% | Default Interest model |
| USDT | No | 10% | Stable Interest model | |||
| USDC | Yes | 85% | 87% | 2% | 10% | Stable Interest model |
liquidation call
The components of the DeXian Lending Protocol provide a liquidation(debt_asset_bucket, debt_to_cover, cdp_id) method, which can be called by any liquidator participant.
| name | type | description |
|---|---|---|
| debt_asset_bucket | Bucket | the underlying borrowed asset to be repaid with the liquidation |
| debt_to_cover | Decimal | the debt amount of borrowed asset the liquidator wants to cover |
| cdp_id | u64 | the #id# of CDP getting liquidated |
A liquidation participant is able to receive collateralized assets containing liquidation incentives for the repayment of debts of the liquidated CDP. Liquidators may set debt_to_cover to -1 to represent the maximum share of liquidations they want to participate in, which is currently 50% of the CDP’s total debt per call. The part of the bucket(debt_asset_bucket) that exceeds the actual repayment payment amount is refunded to the liquidator.
collateral_underlying_asset.amount = [actual_repay_debt.amount * debt_token.price * (1+collateral.liquidation_bonus)] / collateral_underlying_asset.price