Health factor

We compare the total current debt of the token with underlying loans current value and collateral(s) to determine the health.

where,

Note: For on-chain computations, we use USDT as base value to compute values.

Health is monitored at two levels:

  1. dToken level: Determines the total health of the protocol for this asset

  2. user loan level: Determines health of a user’s individual loan

dToken health:

User loan health:

For the above loan discussed, the health factor can be computed as below:

  1. Before partial withdrawl

    • Assuming an interest of 2 USDC accrued,

      $L_{net} =$ 300 + 2 USDC = 302


  1. Post spend

Health factor determines if a loan can be liquidated. Read Liquidations for more info.

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