Protocol Features
Last updated
Last updated
You can follow tutorial for supplying and borrowing assets on the protocol, the rest of this guide will serve as a walkthorugh to understand all of the protocol features and deep dive on what everything entails.
When you deposit assets into the protocol, you immediately begin earning interest. These deposited funds are aggregated into asset pools, making them available for others to borrow. Your deposits will serve as collateral for borrowing, which means that until you deposit funds into certain markets you cannot borrow from other markets.
Additionally, after you have supplied funds to a market, you cannot borrow from that same market, so the corresponding buttons will be disabled. In the screenshot below for example, a user has supplied capital to USDC, so the Borrow button in disabled. Likewise, the user has borrowed capital from WAL, DEEP and SUI, so the Supply buttons are disabled for each of these markets.
It will also show up as disallowed in the Supply/Borrow modal.
The Loan-to-Value (LTV) ratio represents the maximum amount you can borrow against your deposited funds. Each asset type has a different LTV, depending on the token's stability and volatility. The LTV for each market will be displayed on the Borrow LTV column in the UI.
An 80% LTV ratio means that you can borrow up to 80% of your deposited funds, so for examples if you deposit $1000 on the USDC market, you'll only be able to borrow up to $800 worth of all other markets.
This means that all loans are overcollateralized, ensuring that borrowers maintain collateral worth more than the amount borrowed. This approach safeguards the protocol, ensuring solvency even during market downturns.
A liquidation occurs when the value of your debt exceeds a pre-determined threshold, making your position undercollateralized. This threshold is calculated based on a weighted average of the risk levels of your deposited assets. If your borrow balance crosses this limit, a portion of your collateral (20%) is automatically sold to reduce your debt.
The Liquidation Threshold for individual markets is typically 5% above the LTV for that market, meaning that if you've only supplied capital to USDC for example with an LTV of 80%, then your collateral will get liquidated when your debt reaches 85% of your supplied amount.
The screenshot below shows an example of this, where a user has deployed $1000 into USDC with an 80% LTV and an 85% liquidation threshold. So the Safe amount ($800) represents the value after which the user cannot borrow any more funds, and the Liquidation amount ($850) represents the value at which 20% of you collateral will get liquidated to pay out part of your debt.
Liquidators play a key role in maintaining protocol health by stabilizing risky positions. In return, they receive a bonus of 3% above the liquidated amount, creating a financial incentive for timely action.
Alice deposits $10,000 worth of USDC as collateral and borrows $8,000 in SUI.
The value of SUI increases, pushing the total borrowed value to $8,600. Since her borrow now exceeds the safe collateral threshold (85%), her position becomes eligible for liquidation.
A liquidator steps in and repays 20% of Alice’s debt ($8,600) which amounts to $1,720. In return, the liquidator receives $1,720 worth of Alice’s USDC collateral plus a 3% bonus (~$52), totaling $1,772 in USDC.
After the liquidation:
Alice’s USDC collateral is reduced by $1,772, leaving her with $8,228 remaining
Her SUI borrow is reduced by $1,720, lowering her debt from $8,600 to $6,880. This means that her current debt is 83.6% of her supplied amount, putting her below the Liquidation Threshold
The liquidator pays $1,720 in SUI and receives $1,772 in USDC, earning a $52 profit.
Following this partial liquidation, Alice's account is better balanced, reducing her immediate risk of further liquidation and providing a healthier buffer for future market changes.
Interest rates are dynamically adjusted based on supply and demand. When borrowing demand is high, interest rates rise, increasing earnings for suppliers. Conversely, when demand is low, rates decrease, making borrowing more affordable. This real-time adjustment ensures a balanced and responsive financial ecosystem.
Green APRs indicate that you're earning interest for your deposits in the form of fees (Base APR) and incentives (rewards APR). Yellow APRs indicate that you're paying out for borrowing assets on the platform. Rewards APRs on borrows will still show up as green since some markets may be incentivized for users to borrow from them.
The Net APR in your Risk Dashboard is calculated as Daily Earning * 365 / (Total Supplied - Total Borrowed) , so if your borrow APR is higher than your supply APR (like in the screenshot below) your daily earnings will be negative, thus your Net APR will also be negative.
You can also claim your rewards by clicking on the Rewards tab in the top-right corner of the UI, which will display all your claimable tokens.
The protocol continuously monitors your positions using live market data from decentralized price oracles like Pyth. This data feeds into a dynamic risk model, providing a visual representation of your account's health, helping you assess your proximity to liquidation. Hovering over the control gauge besides the Your Supplies and Your Borrows tabs will display the Risk Dashboard.
Key Metrics Displayed in the Risk Dashboard:
Used: The aggregated value of your borrows
Safe: The threshold below which your position is considered safe from liquidation, calculated based on the average risk profile of your deposited assets. To reduce risk, the protocol automatically blocks further borrowing once your position exceeds this limit
Liquidation: The critical threshold where your account becomes eligible for liquidation, if your borrow amount exceeds this limit then a liquidator will step in to pay 20% of your debt and receive part of your collateral
