An asset worth $100,000 might only let you borrow $80,000 against it.
Why the $20,000 difference?
Because lenders need to account for what could happen to the asset's value before the loan is repaid.
How much could its price fall? How easily could it be sold? How much would selling it affect the price?
That's why two different assets worth the same amount can have very different borrowing limits.
The same principle applies at Falcon. When users mint USDf against eligible collateral, the required collateral ratio depends on factors like price volatility, liquidity, and slippage.
Putting assets onchain makes them easier to use in financial applications, but the risks still need to be priced in.
Why the $20,000 difference?
Because lenders need to account for what could happen to the asset's value before the loan is repaid.
How much could its price fall? How easily could it be sold? How much would selling it affect the price?
That's why two different assets worth the same amount can have very different borrowing limits.
The same principle applies at Falcon. When users mint USDf against eligible collateral, the required collateral ratio depends on factors like price volatility, liquidity, and slippage.
Putting assets onchain makes them easier to use in financial applications, but the risks still need to be priced in.