# Concepts

## Supplying Assets

When you supply assets into the protocol, you start earning interest instantly. These assets are pooled and made available for others to borrow.

Your deposits also serve as **collateral**, which allows you to borrow other assets if needed.

## Borrowing Assets

You can borrow supported tokens by using your supplied assets as collateral.

Each token has a **Loan-to-Value (LTV)** ratio, which determines how much you can borrow against it.

Example:

If you deposit $1,000 USDC and the LTV is 75%, you can borrow up to $750 of another token.

You can repay any time to reduce interest or unlock more of your collateral.

## Loan-to-Value Ratio

**LTV** is the maximum percentage of your supplied asset’s value that you can borrow.

Different tokens have different LTVs, based on their risk level and volatility.

Example:

* USDC may have 75% LTV → borrow up to $750 worth of asset on a $1,000 USDC deposit
* More volatile assets usually have lower LTVs

## Interest Rates

Interest rates adjust automatically based on supply and demand. When more users are borrowing an asset, the borrow rate increases — and suppliers earn more. When demand is low, rates decrease. As a supplier, you earn interest; as a borrower, you pay it. Rates update in real-time to keep the system balanced.

## Liquidation Threshold

The **Liquidation Threshold** marks the point at which your borrowed position becomes undercollateralized. This is calculated based on a weighted average of the risk parameters of your supplied assets. If your borrow balance exceeds this limit, a portion of your collateral is liquidated to repay part of the debt.

## Liquidation Bonus

When liquidators step in to stabilize undercollateralized positions, they are rewarded with a **3% bonus** on the portion they liquidate. This incentive keeps the protocol secure by encouraging timely interventions when users fall below the liquidation threshold.


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