Protocol Parameter

Collateral Factor, Reserve Factor, Close Factor, and Liquidation Incentive

Collateral FactorThe maximum that can be borrowed on a particular asset e.g. ORDI collateral factor is 85%, if the price of ORDI is $100, the maximum that can be borrowed is $85 in other assets.

Reserve FactorThe reserve factor represents the percentage of the interest paid by borrowers that is converted into reserves e.g. reserve factor of 25% means that 25% of the interest paid is for the reserves. The reserves can be used by the governance or act as an insurance against borrower default which protects all the suppliers.

Close FactorThe maximum amount that can be liquidated in a single transaction e.g. 50% close factor means that a maximum of 50% of a liquidatable account's borrow can be repaid in a single liquidate transaction.

Liquidation IncentiveThe liquidation incentive determines the discounted amount of the borrower's collateral that the liquidator receives in return for repaying the loan e.g liquidation incentive of 108% means that liquidators will receive receive a discounted amount of the borrower's collateral that is 1.08 times the value of the repayment amount. The following parameters apply only to the testnet.

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