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