Minimum Collateral Ratio (MCR) and Recommended Collateral Ratio

In EpsiLoan, the Minimum Collateral Ratio (MCR) serves as a crucial threshold to prevent liquidation events under normal operations. It represents the lowest ratio of loan to collateral that will not trigger liquidation. Here's a breakdown of the MCR and the recommended collateral ratio:

Minimum Collateral Ratio (MCR):

The MCR for yUSD, which is the lowest ratio of loan to collateral that will not result in liquidation under normal operations, is set at 120%. This means that borrowers must maintain a collateral ratio of at least 120% to mitigate the risk of liquidation.

For example, if a borrower has a loan of 10,000 yUSD, they would need to maintain at least $12,000 worth of Liquid Restaking Tokens (LRTs) as collateral to avoid the risk of being liquidated.

Recommended Collateral Ratio:

While the MCR provides the minimum threshold to prevent liquidation, it's highly recommended for borrowers to maintain a collateral ratio higher than 150%, preferably over 200%. This ensures an additional buffer of safety and helps safeguard against potential fluctuations in the value of the collateral.

Maintaining a higher collateral ratio than the minimum requirement adds an extra layer of protection for borrowers, reducing the risk of liquidation and ensuring the safety of their funds.

In summary, the Minimum Collateral Ratio (MCR) in EpsiLoan is set at 120% for yUSD, while the recommended collateral ratio is higher, ideally exceeding 150% and preferably over 200%. By adhering to these guidelines, borrowers can effectively manage their risk exposure, protect their funds, and avoid the possibility of liquidation within the EpsiLoan ecosystem.