Utilisation Ratio

The solvency of any borrow position depends on the Utilisation Ratio. Again, if Bob borrows a value of 60 USD backed by collateral valued at 80 USD, the Utilisation Ratio will be 80/60 or 1.33. If the Utilisation Ratio reaches 1 or less, Bob’s position is no longer over-collateralised and is therefore insolvent. The protocol will auto-liquidate a portion of Bob's collateral assets to bring his portfolio back within the Utilisation Limits.

The Utilisation Ratio is also affected by price movements of assets and is adjusted block-by-block according to market values determined via the protocol’s pricing oracle. If the Utilisation Ratio is below the required threshold, the borrower can repay a portion of the funds borrowed to regain the required threshold level, or the position will be liquidated.

Our borrower Bob is free to distribute his maximum loan value of 80 USD across as many assets as he wishes. All supplied assets are considered collateral and any enabled asset may be borrowed against it, including the same as the asset supplied.

The total value of supplied liquidity supports the total value of all borrower positions, and vice versa. Every additional borrow position is apportioned against all previously supplied assets used as collateral. The internal logic, which may involve operations with two or more assets at a time, operates on a conversion of assets to USD amounts, using pricing provided by the protocol’s oracle.