> For the complete documentation index, see [llms.txt](https://docs.linxlabs.org/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.linxlabs.org/lending-technical-documentation/markets.md).

# Markets

#### **Understanding Linx Markets**

Linx Markets are the core building blocks of the Linx Lending protocol. Each market represents an independent lending pool pairing a specific collateral token with a borrowable asset on Alephium blockchain.

**Core Concept:** When you create a market, you're establishing an isolated venue where lenders can supply one asset and borrowers can use another asset as collateral to borrow against it. Think of each market as its own mini-protocol with defined rules that never change.

#### **Alephium Implementation: Subcontracts**

On Alephium, each Linx Market is deployed as an independent subcontract. This architectural choice leverages Alephium's contract model to ensure true market isolation - each market has its own state, storage, and execution context. Unlike pooled lending systems where all markets share state, Linx Markets are genuinely separate entities on-chain.

This subcontract approach provides several benefits:

* **True isolation**: Markets cannot interfere with each other at the contract level
* **Clear ownership**: Each market's state and logic is self-contained

#### **Market Parameters**

Every Linx Market is defined by five immutable parameters set at creation:

**1. Collateral Token** The asset borrowers must deposit to secure their loan. Must be a fungible token on Alephium.

**2. Loan Token** The asset available for borrowing. Lenders supply this token to earn interest. Must be a fungible token on Alephium.

**3. LLTV (Liquidation Loan-to-Value)** The maximum ratio of loan value to collateral value before a position becomes liquidatable.

* Example: 80% LLTV means you can borrow up to $80 worth of loan tokens for every $100 of collateral
* If your loan value exceeds this threshold (even by $0.01), your position can be liquidated

**4. Oracle Address** The smart contract that provides price data for the collateral/loan pair. Linx is oracle-agnostic - any pricing mechanism can be used.

**5. Interest Rate Model (IRM)** The smart contract containing the formula for calculating borrowing interest rates based on market utilization.

#### **Market Naming Convention**

Markets follow this format:

```
CollateralToken/LoanToken (LLTV%, Oracle, IRM)
```

Example:

```
ALPH/USDT (85%, DiaOracle-ALPH, DynamicIRM)
```

#### **Immutability & Permanence**

Once a market is created on Linx, its parameters cannot be modified. This immutability provides:

* **Predictability**: Lenders and borrowers know the rules won't change
* **Security**: No governance can alter market behavior after deployment
* **Trust**: The market will function identically as long as Alephium exists

#### **Permissionless Creation**

Unlike traditional lending platforms requiring governance votes for new asset listings, anyone can create a Linx Market. This openness enables:

* Long-tail asset markets that governance might reject
* Experimental collateral types and risk parameters
* Faster market deployment for new tokens
* Innovation without permission

**Guardrails:** While market creation is permissionless, LLTV and IRM must be selected from protocol-approved options to maintain security standards.

#### **How Markets Work**

**For Lenders (Suppliers):**

1. Deposit loan tokens into a specific market
2. Earn interest from borrowers
3. Withdraw supplied tokens plus interest (when liquidity available)

**For Borrowers:**

1. Deposit collateral tokens into a market
2. Borrow loan tokens up to the LLTV limit
3. Pay interest on borrowed amount
4. Repay loan to reclaim collateral

**For Liquidators:** When a borrower's position exceeds the LLTV threshold, liquidators can:

* Repay a portion of the debt
* Receive a discounted portion of the collateral
* Earn profit from the liquidation bonus

#### **Risk Isolation**

Each Linx Market operates independently. If one market experiences issues (bad debt, oracle failure, extreme volatility), other markets remain unaffected. This isolation allows:

* Higher risk markets for volatile assets
* Conservative markets for stable pairs
* User choice based on risk tolerance
* No systemic contagion