> 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/linx-whitepaper/linx-app/borrow.md).

# Borrow

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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:

1. **Market Selection**: Borrowers select a market with their preferred loan asset (e.g., USDC) and collateral (e.g., ALPH) via the Linx App.
2. **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).
3. **Borrowing**: Borrowers receive the loan asset up to the LLTV limit. The DynamicFlowIRM calculates the interest rate based on market dynamics.
4. **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.
5. **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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