Every lending protocol advertises a maximum loan-to-value ratio, and a higher one always looks better. Ours are not high. This post explains what the numbers are, what they are protecting against, and why the maximum is the number you should care about least.
The numbers
| Market | Max LTV | Liquidation threshold | Liquidation bonus | Fall to liquidation from max LTV |
|---|---|---|---|---|
| AAPL, AMZN, GOOGL, META, MSFT, NVDA | 50% | 60% | 5% | 16.67% |
| QQQ, SPY | 60% | 70% | 5% | 14.29% |
| TSLA | 40% | 50% | 7.5% | 20.00% |
Two ratios per market, and they do different jobs. Max LTV is a gate at the front: it is the most you may borrow at the moment you borrow. Liquidation threshold is a line further out: cross it and someone else can repay part of your debt and take collateral at a discount.
The distance between them is the whole design. It is the amount of price movement that turns "you cannot borrow more" into "you are being liquidated". The last column is just that distance expressed as a price fall:
fall to liquidation = 1 - maxLTV / liquidationThreshold
For a 50/60 market: 1 - 50/60 = 16.67%.
Three groups, three arguments
Broad-index ETFs get the most room. QQQ and SPY are baskets of many companies. One firm's bad quarter is diluted by everything else in the index. Their realised volatility is structurally lower than that of their own constituents, and they cannot go to zero because of a single product recall, a single lawsuit or a single resignation. 60/70 reflects that.
Large single names sit in the middle. Apple, Amazon, Alphabet, Meta, Microsoft and NVIDIA are about as stable as single equities get, and single equities are still not stable. A 10% move on an earnings release is unremarkable for any of them. 50/60 with a 16.67% buffer is a deliberate acknowledgement that one scheduled event can eat most of it.
TSLA gets the least room and the largest bonus. Its single-day moves have persistently been larger than those of the other listed names. 40/50 leaves a 20% fall before liquidation from the maximum — the widest buffer of the three groups — and the 7.5% bonus exists to make liquidating it attractive during exactly the fast, ugly move in which liquidators would otherwise rather sit still. An unattractive liquidation is worse for the borrower than an attractive one: it means the position goes unliquidated until it is underwater, and underwater positions are a loss to the treasury.
The second buffer, behind the threshold
The liquidation threshold is not the point of insolvency. It is the point at which liquidation becomes permitted, and there is a second buffer behind it.
At a health factor of exactly 1.00 on a 50/60 market, the debt equals 60% of the collateral value. The position only becomes genuinely underwater — debt exceeding collateral — after a further 40% fall from that point. On QQQ and SPY the second buffer is 30%; on TSLA it is 50%.
That second buffer is what pays for reality: the liquidator's bonus, the slippage of actually selling, the block or two between a price update and a liquidation transaction landing, and the possibility that the price keeps moving while all of this happens. Bad debt is a loss to the protocol's own treasury, which is the same treasury everyone borrows from. Sizing thresholds too close to insolvency does not transfer risk to someone else; it destroys borrowing capacity for everyone.
Why the maximum is not the interesting number
The max LTV only binds once, at the instant you borrow. After that the only number that matters is your health factor:
healthFactor = collateralValue x liquidationThreshold / debt
and you set it by choosing how much to borrow.
Take 10 AAPL at $200.00 — 2,000 USDG of collateral value, 1,000 USDG of capacity.
- Borrow the full 1,000: health factor 1.20, liquidation at $166.67, a 16.67% fall away.
- Borrow 600: health factor 2.00, liquidation at $100.00, a 50% fall away.
- Borrow 500: health factor 2.40, liquidation at $83.33, a 58.33% fall away.
Same market, same parameters, wildly different positions. Halving how much you draw more than triples the fall you can survive. That choice is yours and the protocol will not make it for you — the borrow button stays enabled right up to the limit.
A number we did not tune
Supply caps are unlimited at launch. That is not a statement that these markets are deep; it is a decision to launch with one fewer moving part. It is the parameter most likely to change, and if it does, we will say so here.
Parameters can change
The owner can adjust max LTV, liquidation threshold, bonus and cap on any market, including markets with open positions. Raising a threshold makes existing positions healthier. Lowering one makes them less healthy, and can in principle push a position into liquidation range. Validation enforces that max LTV stays below the threshold, that the bonus stays at or below 20%, and that threshold times one plus bonus stays under 100% — beyond which the liquidation math itself stops being well defined.
The live values are always read from the chain and shown on the parameters section. Those are the real ones; this post is an explanation, not a source of truth.
The honest caveat
None of this protects you from the market. A conservative LTV buys time and lowers the odds of a liquidation; it does not prevent one, and it does nothing about a name that halves over a month. And with yield at zero today, nothing is working in the background to improve your health factor either. The only things that improve it are a rising price and a repayment — and only one of those is under your control.