Collateral
Collateral is security that must be deposited into a smart contract to secure the loan. Collateral can only be retrieved from the contract if the loan is repaid or liquidated.
On Lenfi, collateral can be any native Cardano asset or ADA itself. However, each pool has a determined collateral that can be used for the loans.
For example:
Pool 1
ADA
LENFI
Pool 2
ADA
MIN
Pool 3
LENFI
ADA
Pool 4
LENFI
MIN
Each collateral token has a protocol-defined Liquidation threshold
which is factored in the Health Factor calculation. A higher liquidation threshold means more collateral must be locked in order to retrieve the loan.
Collateral tokens
These are currently accepted collateral tokens.
ADA
130%
150%
LENFI
200%
220%
MIN
170%
190%
WMT
200%
220%
LQ
200%
220%
WRT
200%
220%
COPI
200%
220%
DJED
200%
220%
SHEN
200%
220%
SNEK
200%
220%
IUSD
170%
190%
IAG
200%
220%
HUNT
200%
220%
FLDT
200%
220%
OPTIM
200%
220%
INDY
200%
220%
FACT
200%
220%
The liquidation threshold is used when calculating the Health Factor for already active loans. While initial LT is used when a new loan is being created.
Value calculation
Collateral value is calculated using constant product formula with 0.03% fee.
This method allows Lenfi to efficiently operate in low liquidity markets.
Health Factor
The Health Factor (HF) represents the health of the loan. A borrower can only take out a loan if the HF is greater than 1. If the health factor falls below 1, the loan can be liquidated. In the event of liquidation, the liquidator repays the borrower's loan in exchange for part or all of the collateral, depending on what is needed to compensate for the repayment.
Health Factor - new loan:
Health Factor - loan is active
Example 1: New Loan with Healthy Factor
Collateral Value: 200 ADA
Loan Amount: 100 ADA
Initial Collateral Ratio: 1.5
Health Factor = (200 / 100) / 1.5 = 1.33
The Health Factor is greater than 1, so the loan can be taken out safely.
Example 2: Active Loan with Risky Factor
Collateral Value: 200 ADA
Loan Amount + Interest: 155 ADA
Liquidation threshold: 1.3
Health Factor = (200 / 155) / 1.3 = 0.992
The Health Factor has fallen below 1, meaning the loan can be liquidated.
Below functions consumed collateralValue and loanValue calculated using price feeds.
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