> For the complete documentation index, see [llms.txt](https://alphbanx.gitbook.io/alphbanx/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://alphbanx.gitbook.io/alphbanx/collateralization-ratio.md). # 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.
## 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 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. #### 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.