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Loan collateral

For safety reasons, the total amount that can be borrowed has to be less than the value of the collateral, in case of negative fluctuations in the collateral value and to guarantee the interest payment.
The collateral factor
CFCF
represents how much a user can borrow against the collateral supplied to the protocol, in percent terms. For example, a more stable asset such as USDC may have
CF=80CF=80%
% (for $10 supplied, up to $8 of value can be borrowed against it) whereas ALGO may have
CF=60CF=60%
%.
Consider a user who deposits multiple assets and uses them as collateral for a loan. The borrowable amount
BAtBA_t
at time
tt
for a given loan’s collateral balance is:
BAt=∑i=ASSETcollateralAti∗Pi∗CFiBA_t=\sum_{i=ASSET}^{collateral}A_{t_i}*P_i*CF_i
Where:
  • ​
    AtiA_{t_i}
    denotes the current user collateral balance if they were to withdraw the Asset.
  • ​
    PiP_i
    is the price of the collateral asset​.
  • ​
    CFiCF_i
    is the collateral factor.
  • the subscript
    ii
    represents each collateral of the loan.
Since the collateral is composed of different assets, the maximum borrowable amount of each collateralized token must be computed and summed together.