Risks of iA Borrow

iA borrow was designed to be a user-friendly anf fair protocol. However, there are inherit risks for borrowing. In specific, liquidation of a position is the main risk of using decentralized lending protocol. In this part we explain this risk and inshAllah's approach to minimize this risk Liquidation Risk If the value of the collateral decreases such that the LTV exceeds ${LiquidationLTV}$, i.e., 66.67% the position will be liquidated by selling part of the collateral to reduce or payback the outstanding debt. Example

A position was started with 10 SOL at a price of $150/SOL. The user borrowed 900 iAUSD (representing 60% LTV). If the SOL price drop to $135/SOL, the 10 SOL collateral value is now $1350. With 900 iAUSD outstanding debt, the LTV becomes 900/1350 = 66.66%. At this point, the position will be liquidated by selling 6.67 SOL of the collateral to pay back the 900 iAUSD outstanding debt. The rest of the collateral is paid back to the user. It should be noted that the user still owns 900 iAUSD in addition to the returned collateral.

How iA Borrow Minimizes the Liquidation risk

• User Notifications

  We are setting up a system to notify users using email or Telegram messages when their positions are in the warning zone, i.e., close to liquidations. This helps user avoid liquidations by posting more collateral or paying back part of the outstanding loan

• Partial liquidations

  When a position is liquidated, only a part of the collateral is sold to pay back the outstanding loan. This reduces the impact on the user

• No Liquidation Penalty

  Other lending protocols charge liquidation penalty when a position gets liquidated. iA Borrow doesn't charge any liquidation penalty. Only the DEX swap fees to sell the collateral to iAUSD are charged to the user.