Collateralization ratio
Last updated
Last updated
Understanding the Collateralization Ratio in AlphBanX
In the AlphBanX platform, the collateralization ratio is a critical metric that ensures the stability and security of loans. Here's a concise overview:
Definition and Importance: The Collateralization Ratio is the ratio of the collateral value to the borrowed amount, serving as an indicator of the loan's security. A higher CR signifies better coverage, minimizing the risk of liquidation.
Minimum Requirement: To maintain system stability, AlphBanX mandates a minimum CR of 150% for borrowing. This ensures that the value of the collateral significantly exceeds the loan amount, providing a buffer against market fluctuations.
Continuous Monitoring and Liquidation Mechanisms: The platform continuously monitors CR to prevent under-collateralization. If a loan's CR falls below 150%, it enters auction liquidation, where collateral is sold at a discount.
Encouragement and Tools for Users: AlphBanX encourages users to maintain a high CR to avoid liquidation risks. The platform offers tools to monitor and manage CR, helping users keep track of their collateral and loan values.
Influencing Factors: CR is affected by changes in the value of the collateral and the loan amount. By maintaining a healthy CR, users can ensure the security of their loans and benefit from the stability provided by AlphBanX.
