Parameters

Key Parameters for DeFi Lending and Borrowing on Rhombus

This section covers the essential parameters involved in DeFi lending and borrowing.

Max LTV (Loan-to-Value Ratio)

Max LTV represents the highest amount you can borrow relative to your collateral. For example, if you're using $KAIA as collateral on Rhombus' KAIA Market, the maximum LTV is 65%. This means for every $KAIA you deposit, you can borrow up to 0.65 $KAIA in return.

Liquidation Threshold

The liquidation threshold is the point where your loan is considered undercollateralized and is at risk of being liquidated. The liquidation threshold for $KAIA is 70%. If the value of your $KAIA loan reaches 70% of the value of your collateral, the protocol may sell off your collateral to cover the loan.

Liquidation Penalty

If your collateral is liquidated, a penalty is applied. On Rhombus, the liquidation penalty is 7~10%. So, if your loan is liquidated, you'll need to pay this additional peanalty on top of your loan balance.

Utilization Rate

The utilization rate shows how much of the available funds are currently being borrowed. For instance, if the utilization rate is 78%, that means 78% of the total available funds are being lent out. This percentage directly impacts interest rates—the higher the utilization, the higher the interest rates due to increased demand for the remaining available funds.

Health Factor

The health factor measures your loan's safety margin. A health factor above 1 means your loan is safe from liquidation. If it drops below 1, your loan is undercollateralized, and liquidation may occur. You can monitor the health factor of your loans under the Rhombus 'Dashboard.'