Collateral Factors
Position-level borrowing power, dual-oracle valuation, and how LP collateral capacity is reported to the Hub.
Overview
Collateral factors define the portion of an asset's USD value that can be borrowed against. For example, a 75% collateral factor allows a user to borrow up to $75 against $100 of collateral before accounting for liquidation penalties, reserve factors, and other protocol buffers.
In Avana, valuation is position-based, not pool-based. A user may deposit dozens of LP positions into a single Borrow Spoke, but borrowing power is derived from the aggregate USD value of the underlying assets across those positions, not from a single vault or pair. Each LP position is valued independently, and its contribution is then added to the user's total borrowing capacity.
Key Principle: collateral factors are not applied at the spoke level. The system admits approved pools, values each LP position conservatively, and then reports the summed borrowable capacity to the Hub for final credit enforcement.
How Collateral Factor Works
In practice, collateral factors sit inside a broader LP-collateral workflow. The spoke first checks whether a pool is supported, then values the position through the oracle stack, converts that value into borrowable capacity with the pool's configured risk tier, reports the aggregate result to the Hub, and finally coordinates unwind logic if liquidation is required.
Pool Validation
LP positions are accepted only from a pre-approved set of pools aligned with governance-defined risk parameters.
Position Valuation
Each LP position is priced in USD through a dual-oracle system that combines Chainlink price feeds with AMM TWAPs inside Avana's extended Aave-style oracle framework.
Borrowing Capacity
Borrowable amounts are calculated from position value and the configured loan-to-value for the pool's risk tier.
Hub Reporting
Each Borrow Spoke reports a user's total borrowable capacity to the Hub, which enforces global credit limits and liquidity constraints.
Liquidation Execution
When the Hub triggers liquidation, the spoke takes custody of the LP position through prior approval and performs an orderly unwind of the underlying liquidity.
Formula
collateralValue = (fullValue + feeValue) × collateralFactor / 2^32At the implementation layer, the position is only healthy when this discounted collateral value remains above the required debt amount.
Token-Level Granularity
Inside the Borrow Spoke, collateral factors are not applied to the account as a whole. They are derived from the individual tokens that compose each LP position. The spoke maintains atokenConfigs mapping.
When health is checked, the spoke calculates the minimum collateral factorbetween the two tokens in the LP pair and applies that factor to the position-level valuation. For an ETH/USDC position with ETH at 77.5% and USDC at 85%, the governing factor would be 77.5%.
Determining Borrowable Value
Borrowable capacity is built from a gated valuation flow: only approved pools are admitted, each LP position is priced independently, and the resulting borrowable value is aggregated across the user's deposited positions before the Hub applies global liquidity and credit constraints.
Step 0: Admit Only Approved Pools
Unsupported pools never enter the collateral set. Governance-approved pool lists and risk-tier assignments define which LP formats can contribute to borrowing power.
Step 1: Price the Underlyings Through Dual Oracles
Use Chainlink feeds, AMM TWAPs, and the protocol's Aave-style oracle stack to derive safe USD prices for the underlying assets while resisting spot-state manipulation.
Step 2: Reconstruct and Value Each LP Position
Compute underlying token amounts from liquidity plus tick range for concentrated positions or from pool weights for fungible LPs, then convert those balances into a position-level USD value.
Step 3: Apply the Governing CF and Pool Risk
Identify the weaker token in the pair, use its collateral factor as the baseline cap on the LP's USD value, and then apply the pool-level risk factor associated with the LP family and volatility profile.
Reference Pool-Level Risk Bands
On top of the lower-token CF, apply a pool-level risk factor based on LP type and volatility:
- • Stablecoin/Stablecoin LPs → 0.90
- • ETH/Stable LPs → 0.85
- • WBTC/Stable LPs → 0.85
- • ETH/WBTC LPs → 0.85
- • ETH/Alt LPs → 0.80
- • Alt/Alt LPs → 0.75
- • High-volatility / small LPs → 0.70
Step 4: Aggregate Capacity and Report to the Hub
Each independently valued LP position contributes to the user's total borrowable capacity inside the Borrow Spoke. The spoke then reports that aggregate capacity to the Hub, which enforces global credit limits, borrow availability, and liquidation triggers.
Borrowable Amount
Borrowable USD = Position USD Value × Lower Token CF × Pool-Level RiskLiquidation thresholds, bonuses, and reserve factors are applied after borrowable LTV is computed.
How It Works Together
Avana separates collateral admission, valuation, aggregate borrowable capacity, and liquidation execution into a single coherent flow. Each LP position is priced on its own, the resulting borrowable value is summed at the user level, and the Hub applies protocol-wide credit constraints on top of that aggregate result.
- Value each approved LP position - The Borrow Spoke reconstructs the underlying exposure, prices it through the oracle stack, and applies the governing collateral factor for that position.
- Aggregate user borrowing power - Position-level contributions are added together so users can borrow against the combined value of many LP positions inside one spoke.
- Let the Hub enforce global limits - The Hub receives total borrowable capacity, applies liquidity constraints, and blocks borrowing that would exceed protocol-wide guardrails.
- Unwind collateral when liquidation is triggered - If a position falls below allowed borrowing capacity, the Hub can trigger liquidation and the spoke takes custody of the LP position, unwinds the underlying liquidity, repays debt, and settles the remaining value through the liquidation path.
Key Benefit: Users see borrowing power at the aggregate account level, while the protocol still values risk and executes liquidations at the LP-position level.
Single Token Collateral Factors
We assign LTVs for the most popular tokens as a baseline. These values are used when the asset is supplied individually or as the weaker token in an LP.
| Token | Target LTV | Notes |
|---|---|---|
| USDC | 85% | Stablecoin — high LTV |
| USDT | 85% | Stablecoin — high LTV |
| DAI | 80% | Stablecoin, slightly lower than USDC/USDT |
| WETH | 77.5% | Blue-chip ETH |
| WBTC | 70% | Blue-chip BTC |
| LINK | 65% | Large-cap alt, more volatile |
| MKR | 60% | High value but concentrated |
| AAVE | 55% | Protocol token |
| UNI | 50% | Governance token |
| COMP | 50% | Established governance token |
| SUSHI | 35% | Small-cap / governance token |
| LDO | 30% | Governance / newer token |
LP Pair Collateral Factors
Final borrowable LTV for LP pairs combines the lower token CF with pool-level risk:
| LP Pair | Lower Token CF | Pool-Level Risk | Final Borrowable LTV |
|---|---|---|---|
| USDC/USDT | 85% | 0.90 | 76.5% |
| USDC/DAI | 80% | 0.90 | 72.0% |
| DAI/USDT | 80% | 0.90 | 72.0% |
| ETH/USDC | 77.5% | 0.85 | 66.0% |
| ETH/USDT | 77.5% | 0.85 | 66.0% |
| ETH/DAI | 77.5% | 0.85 | 66.0% |
| WBTC/ETH | 70% | 0.85 | 59.5% |
| WBTC/USDC | 70% | 0.85 | 59.5% |
| LINK/ETH | 65% | 0.80 | 52.0% |
| UNI/ETH | 50% | 0.80 | 40.0% |
| UNI/USDC | 50% | 0.80 | 40.0% |
| LDO/ETH | 30% | 0.75 | 22.5% |
Example Calculations
Example A — Single Token (USDC)
- • User deposits $10,000 USDC
- • Target LTV: 85%
- • Borrowable = $10,000 × 85% = $8,500
(Subject to liquidation thresholds and reserve factors)
Example B — ETH/USDC LP
- • LP Position Value: $963.51
- • Single-token CFs: WETH 77.5%, USDC 85%
- • Lower token CF = 77.5%
- • Pool-Level Risk Factor = 0.85
- • Final Borrowable = $963.51 × 77.5% × 0.85 ≈ $634.88
Liquidation threshold, bonus, and reserve factor are applied separately.
FAQs
Why use the lower token CF for LPs?
LPs contain two assets. If one crashes faster than the other, the LP's USD value can drop quickly. Using the lower token CF prevents over-leveraging against a pool whose weaker side could cause contagion.
How often are valuations updated?
Valuations are computed on demand for borrow, repay, withdraw, liquidation, or UI queries. Chainlink is the primary feed, cross-checked with TWAPs. If feeds diverge beyond a tolerance, an extra discount or temporary restriction is applied.
How do these numbers compare to Aave?
Single-token LTVs are Aave-aligned. For LPs, an additional pool-level risk factor applies. Users can see clearly how borrowable value is computed and why it differs from single-token collateral.
Can users still borrow more if the LP is mostly stablecoins?
Yes. Pool-level risk factors are higher for stable/stable LPs, which preserves capital efficiency while still respecting protocol safety.
Do liquidation buffers or bonuses reduce borrowable amount?
No. Borrowable LTV is computed first. Liquidation thresholds, bonuses, and reserve factors are applied afterwards to manage safety.