Borrow
Linx Lending enables users to borrow assets against overcollateralized positions in a trustless and efficient manner via the Linx App. Borrowers can access liquidity from isolated markets while benefiting from competitive rates and customizable risk parameters.
Key Features
Overcollateralized Loans: Borrowers must deposit collateral (e.g., ALPH, LINX, WETH, WBTC) exceeding the borrowed amount to mitigate default risk.
Permissionless Borrowing: Users can borrow from any market without approval, provided they meet the market’s LLTV requirements.
Customizable Markets: Borrowers can participate in or create markets with specific collateral types, loan assets, oracles, and LLTVs, tailoring risk and cost profiles.
Liquidation Protection: Automated liquidation mechanisms protect lenders by selling collateral if a borrower’s position becomes under-collateralized.
Borrowing Mechanism
Borrowing on Linx Lending follows a streamlined process:
Market Selection: Borrowers select a market with their preferred loan asset (e.g., USDC) and collateral (e.g., ALPH) via the Linx App.
Collateral Deposit: Borrowers deposit collateral, which must exceed the loan amount based on the market’s LLTV ratio (e.g., $10000 worth of WBTC as collateral for a $8000 USDC loan).
Borrowing: Borrowers receive the loan asset up to the LLTV limit. The DynamicFlowIRM calculates the interest rate based on market dynamics.
Position Management: Borrowers monitor their loan-to-value (LTV) ratio to avoid liquidation. If the LTV exceeds the market’s threshold (e.g., 86%), the protocol triggers automatic liquidation.
Repayment: Borrowers repay the loan plus accrued interest to reclaim their collateral. Partial repayments are supported, reducing interest costs.
Liquidation Mechanism
To ensure lender protection, Linx Lending implements a robust liquidation process:
Threshold Monitoring: The protocol uses oracle(s) (e.g. DIA, more will follow) to track collateral and loan asset prices.
Liquidation Trigger: If a borrower’s LTV exceeds the market’s liquidation threshold, the position becomes eligible for liquidation.
Collateral Sale: The protocol automatically sells a portion of the collateral to repay the loan and interest, with a liquidation incentive factor (LIF) applied (e.g., maxLIF = 15%).
Bad Debt Handling: If collateral is insufficient, bad debt is socialized across the market’s lenders, reducing total supply and borrow shares.
Benefits for Borrowers
Competitive Rates
Capital Efficiency: Higher LLTVs allow borrowers to maximize leverage, unlocking more liquidity against their collateral.
Flexibility: Borrowers can choose or create markets with preferred assets and risk parameters, enabling tailored borrowing strategies.
Transparency: Immutable market parameters and public oracles ensure predictable borrowing conditions.
Risk Management
Overcollateralization: Reduces default risk by requiring collateral to exceed loan value.
Oracle-Agnostic Design: Supports multiple oracle types (once more oracles become available) for accurate price feeds, reducing manipulation risks.
Audited Contracts: Regular audits and formal verification enhance security, mitigating smart contract vulnerabilities.
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