@ghostpen
Learn Key Collateral Metrics And Concepts You Need To Know in 120 Secs
🔸 Collaterization Ratio:
It is the value of collateral divided by Loan amount × 100.
Helps you determine how much you can get for your collaterals
For example
If you can only get a $100 loan for a $150 Eth as collateral, that's 150% collaterization ratio
🔸 Liquidation Threshold:
The point where your collateral is sold to cover the loan (Maker DAO is 130%)
That is,
if your collateral (Value) drops to $130, you risk liquidation if you don't add more ETH or pay back part of the loan
Varies by asset type and protocol
🔸 Loan-to-Value (LTV) Ratio
It's the inverse of the collaterization ratio It indicates how much you can borrow against your collateral
E.g A 66% LTV means you can borrow $66 for $100 collateral
🔸Oracles
Third-party services (e.g Chain link) that provide real-time price feeds to ensure accurate collateral Value
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