# Collateralization ratio

### Understanding the Collateralization Ratio in AlphBanX

In the AlphBanX platform, the collateralization ratio (CR) is a critical metric that ensures the stability and security of loans.

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## Definition and Importance

The **Collateralization Ratio** is the ratio of the value of your deposited ALPH to the amount of ABD you’ve borrowed. A higher CR indicates that your loan is well-secured, lowering the risk of liquidation. Maintaining a strong CR helps safeguard your position against market volatility and ensures the overall health of the protocol.

## Minimum requirement&#x20;

AlphBanX mandates a **minimum CR of 200%**. This means your collateral must be worth **at least 2×** the amount of ABD you borrow. If your CR drops below 200%, your vault is flagged for liquidation.

#### &#x20;Collateral Ratio Formula

`Collateral Ratio (CR%) = (Value of Collateral / Outstanding ABD Debt) × 100`

**Example:**

* You deposit **$3,000** worth of ALPH
* You borrow **1,000 ABD**
* Your CR = `(3,000 / 1,000) × 100 = 300%`

### What Happens If CR Drops?

* If your CR falls **below 200%**, the vault becomes eligible for **liquidation**
* The loan is then auctioned off using bids from **Auction Pools** (5%, 10%, 15%, and 20% discount tiers)
* Your ALPH is sold at a discount to repay your ABD debt
* Any leftover collateral is returned to you

### Tools to Help You

AlphBanX provides users with visual tools and live metrics:

* Live **CR% tracker** in your dashboard
* Options to **add more ALPH** or **repay ABD** at any time

#### Factors That Influence CR

* **ALPH price volatility** (down = CR drops)
* **Borrowing more ABD** without increasing collateral
* **Partial loan repayment** (improves CR)
* **Additional ALPH deposits** (also improves CR)

AlphBanX classifies vault health into several collateralization ratio (CR) zones to help you manage risk:

• **Conservative:** A CR above 400% is considered very safe. Vaults in this zone are well-collateralized and unlikely to face liquidation under normal market conditions.

**• Moderate:** A CR between 280% and 400% is also safe, but users should keep an eye on market movements that could push their vaults into a riskier state.

• **Aggressive:** A CR between 230% and 280% means your vault is becoming riskier. While still above the minimum, significant price drops could move you into the danger zone.

• **High Risk:** A CR between 200% and 230% is very close to the liquidation threshold. Vaults in this zone are at elevated risk and should be monitored closely.

• **Liquidation Zone:** If your CR falls between 100% and 200%, your vault is eligible for liquidation and auction. You should act immediately to add collateral or repay debt to avoid loss.

> ⚡ Tip: Keeping your CR above **400%** is a recommended best practice. It gives you a cushion against market swings and helps protect your vault from liquidation.


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