Borrowing

Collateral Assets

The Collateral Pools enable borrowers to deposit collateral—quantified as CQ (Collateral Quantity)—and obtain borrowing capacity, which is a percentage of the total collateral. To borrow from the asset pool, borrowers must deposit collateral into the Collateral Pools. This collateral is securely stored within the borrower's Obligation object.

Collateral Factor (CF)

To regulate the proportion of coins that can be borrowed using a specific collateral coin, a parameter known as CF (Collateral Factor) is used in each Collateral Pool. For instance, if you deposit 1 ETH into a Collateral Pool where the current CP (Collateral Price) is $1,000, and the CF of ETH in the Collateral Pool is 0.6 (or 60%), you are entitled to borrow up to 60% of your deposited ETH. In monetary terms, this equates to 1 * $1,000 * 0.6 = $600. The CF is typically set at a value less than 1.

The amount you can borrow from the asset pools is contingent on the CC (Collateral Credit) of your collateral. Your borrowing capacity, reflected as CC, is calculated using the following formula:

$$CC = ∑ (CQ_i * CP_i * CF_i)$$

CC = Collateral credit

CQ = The quantity of the collateral coins that have been deposited

CP = The price of the collateral coins

CF= The factor of the collateral

• The Collateral Factor is a multiplier used to determine the maximum loan value against your assets, and its value must not exceed 1, to maintain a conservative lending approach.

Borrow Factor (BF)

The BF (Borrow Factor) is applied to mitigate the risks associated with the volatility of certain coins. This factor influences borrowing assets more expensive when they are more volatile and, conversely, cheaper when they are less volatile. For every asset, we have a different Borrow Factor that is factored in when calculating your BF.

$$BC = ∑ (BQ_i *BP_i * BF_i)$$

BC = Borrow Credit

BQ = The quantity of the borrowed coins

BP = The price of the borrowed coins

BF = The borrow factor of a coin

• The Borrow Factor, should be set at a minimum of 1, reflecting the minimum amount of collateral required to take out a loan, ensuring that the loan value is always sufficiently backed. All BFs provided below are examples

Taking the previous example further, let's incorporate two asset pools, STORY, and USDC, with different borrow factors due to their price stability. Assuming USDC has a borrow factor (BF) of 1 due to its stability and STORY has a BF of 1.5 due to higher volatility, and you have deposited 1 ETH into the collateral pool. The maximum value that can be borrowed for the specific asset can be calculated as CC / BF.

$${BC \leq CC} \\ {BQ*BP \leq {CC \over BF}}$$

With your CC valued at $600 for 1 ETH (from the CP of ETH being $1,000 and a CF of 60%), the maximum value you can borrow in USDC would be the full value of your $CC/BF_{usdc}$ is $600 / 1 = $600

For STORY, however, due to its higher BF of 1.5, the calculation adjusts, $600 / 1.5 = $400

Thus, you can borrow $600 of USDC but only $400 of STORY with your collateral valued at $600.

Health Factor

The Health Factor represents a quantifiable measure that signals the degree of risk associated with your pledged assets before reaching the point where they may be sold off to cover debts. A greater Health Factor signifies a more secure and stable stance, decreasing the likelihood of forced asset liquidation. Liquidation is triggered when the health factor falls below 1.

$$HealthFactor = {CC \over BC}$$

A specific guideline of health factors will be announced.