Tokenized Collateral: Look Beyond Market Price Changes to Financing Haircuts
Chainlink’s Fulcrum introduction describes incorporating collateral valuation and the haircut agreed by both parties into the financing workflow. Here, a haircut is a risk discount: the collateral value recognized by the protocol is lower than its market value used for valuation.
This introduces a variable worth examining separately: when prices are stable, an increase in the agreed haircut may still reduce the recognized value; when prices rise, the amount that can be financed cannot be inferred from the price increase alone. This is an analysis of how terms and valuation interact, not an empirical measurement of any particular loan.
The original article also describes the ability to trigger margin calls or liquidation based on a user-defined coverage ratio. Therefore, when observing this type of financing, track market valuation, the applicable haircut, and the trigger ratio, and ask when the terms take effect. Looking only at asset prices can obscure why the value recognized by the protocol changes.
The above is based on the original product description. It does not mean that all venues have completed integration, nor does it provide a current loan amount or promise of returns.
Source: https://chain.link/blog/introducing-chainlink-fulcrum
Chainlink’s Fulcrum introduction describes incorporating collateral valuation and the haircut agreed by both parties into the financing workflow. Here, a haircut is a risk discount: the collateral value recognized by the protocol is lower than its market value used for valuation.
This introduces a variable worth examining separately: when prices are stable, an increase in the agreed haircut may still reduce the recognized value; when prices rise, the amount that can be financed cannot be inferred from the price increase alone. This is an analysis of how terms and valuation interact, not an empirical measurement of any particular loan.
The original article also describes the ability to trigger margin calls or liquidation based on a user-defined coverage ratio. Therefore, when observing this type of financing, track market valuation, the applicable haircut, and the trigger ratio, and ask when the terms take effect. Looking only at asset prices can obscure why the value recognized by the protocol changes.
The above is based on the original product description. It does not mean that all venues have completed integration, nor does it provide a current loan amount or promise of returns.
Source: https://chain.link/blog/introducing-chainlink-fulcrum