Lending Pools & Collaterals

Lending Pools

Xfactory's lending pool architecture is based on isolated Lending Pools. If a borrower is liquidated in one Lending Pool, then the other Lending Pools will not be affected.

Certain tokens like DARKX will be borrowable in multiple Lending Pools. Lenders will be free to choose to which one they lend their tokens, and we should expect the DARKX interest rate to be different across them. This is a great way for both borrowers and lenders to better manage their risks.

Collateral

Xfactory allows borrowers to use LP tokens as collateral. At any given point in time, the value of the ABC/XYZ LP token is backed 50% by ABC and 50% by XYZ. We use this property to create an optimal collateralization model to ensure loans backed by LP tokens are as safe as possible.

The collateralization model calculates how much collateral is needed for a loan to be able to pay back the lender if there is a price swing between the two assets in the LP token. If the price swing is higher than the specified safety margin, the loan becomes liquidatable.

Since each pair may have different price volatility expectations, the safety margin for each pair is specified in each LP token pair contract. The default setting allows one asset to increase by up to 150% or decrease by 60% with respect to the other. However, stablecoin pairs are often set with low safety margins, which allow for much higher max leverage.