> For the complete documentation index, see [llms.txt](https://lenfi.gitbook.io/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://lenfi.gitbook.io/docs/lenfi-v1-protocol/lenfi-p2p-aada-v1/how-does-it-work.md).

# How does it work?

<figure><img src="/files/y52A428fscLqrH2it7wJ" alt=""><figcaption><p>A full walkthrough of the V1 protocol </p></figcaption></figure>

**Liquidity Request** - The **Borrower** creates a **Liquidity Request** with custom parameters such as **Collateral**, **Interest**, **Term**, and type of asset to be borrowed.

The **Borrower** can cancel the request before it is funded.

**Funding the request** - The **Lender** can select a request using the integrated filters.

**Liquidity Desposit** - The **Lender** creates a **Liquidity Deposit** with custom parameters such as **Collateral, Interest, Term**, and **type of asset** on offer.

The **Lender** can cancel the **Lender request** before it is funded.

**Finding a Borrower** - Every **Borrower** can select a deposit to take using the integrated filters.

**Interim period** - The **Borrower** must return the loan + interest before the loan deadline. In the event of failure, the Lender can liquidate the loan and receive the **Collateral** as compensation.

**Post-loan scenarios:**

* The **Borrower** successfully repays the loan, and the Lender claims his **assets + accumulated interest.**&#x20;
* The **Borrower** fails to repay the loan on time, and the **Lender** triggers a liquidation.

Every loan is secured by a **Health Factor** solution implemented to protect lenders against dramatic drops in collateral value. Whenever the **Liquidation Threshold** falls below 1.00, the **Lender** can manually liquidate the loan using the [**Liquidation Oracle**](/docs/lenfi-v1-protocol/lenfi-p2p-aada-v1/liquidation-oracle.md).


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