Mortgage value

Users will need to pay their collateral when trying to get a loan. Each market has a collateral factor, from 0 to 1, representing the fraction of the underlying asset value that can be borrowed. Unpopular, illiquid assets are bad collateral. Therefore, users will have to pay less popular tokens as collateral. Conversely, if a user pays with a popular token, the amount of his collateral is reduced.

Cryptocurrencies are known for their volatility. If the token rate falls, the collateral could depreciate significantly, which would have serious consequences for the system and the community. To solve this problem, we introduced a borrowing capacity for each account. The account value of the token balance multiplied by the collateral factor equals the user's borrowing power. Users can obtain loans up to their borrowing capacity.

Collateral value with reputation

By utilizing the reputation represented by CFH tokens, the collateral value required for the borrowing agreement can be reduced. Each marketplace can decide if they want to accept CFH tokens as part of the collateral value. Furthermore, it will offer a comprehensive possibility for unsecured debt.