How it works for borrowing
Borrowing Mechanics
Collateralization Ratio
The collateralization ratio is crucial in maintaining the security of the borrowed funds. This ratio is calculated as follows:
A higher ratio indicates a safer loan, while a lower ratio increases the risk of liquidation.
Interest Rates for Borrowing
Interest rates on borrowed funds are dynamically adjusted based on the supply and demand within the Pluz Finance ecosystem. The rates are designed to balance the needs of borrowers and lenders, ensuring a healthy and efficient market.
Example Scenario
If a user deposits $1,000 worth of WETH as collateral and the platform allows a 3x borrowing leverage, the user can borrow up to $3,000 worth of assets. This borrowed amount can then be used in various DeFi strategies to earn higher yields.
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