Collateraization and Liquidation

iA Borrow is an over-collaterlized lending protocol. Each position collateral should be higher than the position's outstanding debt. A position Loan-to-Value (LTV) is defined as

$$LTV_{user} = \frac{Value(iAUSD_{user})} {Value (iASOL_{user})}$$

The system has a ${LiquidationLTV}$ which is the maximum LTV that is allowed for each position. Any position that exceeds the ${LiquidationLTV}$ is liquidated to maintain the system's integrtity

In addition, the system has a $WarningLTV$ which indicates that the user's position is close to the liquidation threshold. Reaching the $WarningLTV$ indicates the position is at risk of liquidation. The position's owner needs to take action either by adding collateral or reducing the outstanding debt to avoid liquidation.

The liquidations in iA Borrow are partial liquidations to reduce the impact to the position's owner.\

The current implementation uses the following parameters

• ${LiquidationLTV} = 66.6$7%. This correspnds to an over-collateratiaion ratio of 150%

• ${WarningLTV} =$62.5%. This correspnds to an over-collateratiaion ratio of 160%

Auto-safe Borrow The recommended starting LTV for lending positions is 50%, i.e., 200% over-collateralization. This recommendation allows for position stability even with the existence of price volatilty.