Borrow
Last updated
Was this helpful?
Last updated
Was this helpful?
Nexus Money Market allows users to borrow assets by locking up collateral, enabling them to access liquidity without selling their holdings. Since borrowing is overcollateralized, users must deposit assets worth more than the amount they wish to borrow. This ensures the protocol remains solvent and minimizes risk.
The amount a user can borrow is determined by the Loan-to-Value (LTV) ratio of the collateralized asset. Each asset has a predefined LTV, which dictates the borrowing capacity relative to the collateral deposited. Borrowers must maintain their collateral above the liquidation threshold—if the value of their collateral drops too low, it may be partially liquidated to repay the loan and keep the system stable.
A key metric for borrowers is the Health Factor (HF), which measures the safety of their position.
It is calculated based on the total value of the collateral versus the total borrowed amount. A higher HF indicates a safer position, while a lower HF means the risk of liquidation is increasing. If the Health Factor drops below 1, liquidation is triggered, and a portion of the collateral is sold to repay the debt. Borrowers can avoid liquidation by repaying the loan or adding more collateral to improve their Health Factor.
Interest on borrowed assets is dynamically adjusted based on supply and demand. When most of the liquidity pool is utilized, borrowing rates increase, encouraging repayments and attracting more liquidity providers. Conversely, when borrowing demand is low, interest rates decrease to incentivize more borrowing.
Users can repay their loans partially or fully at any time, which reduces their debt and improves their Health Factor. Once fully repaid, the collateral becomes available for withdrawal. The protocol continuously updates interest rates and borrowing conditions based on on-chain data, liquidity utilization, and risk parameters, ensuring a fair and transparent lending environment.
By borrowing through Nexus Money Market, users can unlock capital while retaining exposure to their assets, allowing them to optimize their financial strategies within the DeFi ecosystem.