LiquidOps Docs
Home
  • πŸ‘‹Welcome to LiquidOps
  • πŸ“œProtocol
    • Oracle
  • πŸ”Security
    • Audits
  • βš™οΈDevelopers
    • LiquidOps JS
      • Installation & quickstart
      • Token data
      • Utility functions
      • oToken data functions
      • Protocol data functions
      • Lending
      • Borrowing
      • Liquidations
      • Retrieving transactions
  • πŸ”§How to Use LiquidOps
    • How do Liquidations Work in Overcollateralized Lending Protocols?
    • How does LiquidOps Enable Decentralized Leverage in the Arweave and AO Ecosystem?
    • How to Use LiquidOps: A Step-By-Step Guide
  • πŸ“˜Protocol Mechanics
    • The Jump Rate Interest Model
    • The LiquidOps Auction Model
  • Cross-Collateral Lending Protocols
  • How are Lending Protocol Interest Rates Determined?
  • Lending Pools vs. Peer-to-Peer Lending
  • πŸ’ΈEarning Strategies
    • Places to Earn Yield in the Arweave and AO Ecosystem
  • ✨Project Highlights
    • Project Highlight: Astro
  • Project Highlight: Community Labs
  • Project Highlight: Botega
  • 🌐The AO and Arweave Ecosystem
    • AO Fair Launch
    • Understanding AO: Key Projects and Pre-Bridged Assets Overview
  • Additional links
    • Send feedback
    • Linktree
  • Social media
    • X
    • Discord
    • GitHub
Powered by GitBook
On this page
  • Cross Collateral Lending
  • What Are Cross-Collateral Lending Protocols?
  • How Do They Work?
  • Benefits this Kind of Lending Protocol Offers!

Was this helpful?

Edit on GitHub

Cross-Collateral Lending Protocols

PreviousThe LiquidOps Auction ModelNextHow are Lending Protocol Interest Rates Determined?

Last updated 12 days ago

Was this helpful?

Cross Collateral Lending

In decentralized finance, borrowing usually means using a single type of token as collateral. In cross-collateral lending protocols on the other hand, let users use multiple assets at the same time to secure a single loan.

This makes it possible to combine different types of tokens, making borrowing more easy, efficient and flexible.

Let’s look into it!

What Are Cross-Collateral Lending Protocols?

Cross-collateral lending protocols are platforms that allow users to use a mix of different tokens as collateral for a single loan. Instead of locking only one asset, users can deposit a bundle of tokens for increased borrowing power and reduced risk of liquidation.

How Do They Work?

  1. First, users deposit multiple assets into the protocol.

  2. After this, the protocol will add up the value and risk of all tokens deposited.

  3. Based on these, it sets a borrowing limit based on a blended loan-to-value (LTV) ratio.

  4. If a loan is issued, it will be backed by all the tokens deposited as collateral.

  5. If the total collateral value drops too low, the protocol can sell off just enough assets to cover the risk.

Benefits this Kind of Lending Protocol Offers!

  • Better Capital Efficiency: You can borrow more with the same assets by pooling them together.

  • Reduced Liquidation Risk: One asset dropping in value is less risky when others are still strong.

  • Flexible Collateral Choices: You can use different types of tokens – volatile coins, stablecoins, even yield-earning assets.

  • Easier To Manage: You can handle one loan backed by multiple assets instead of managing several separate ones.