Collateral value limits

A maximum global deposit limit is set for each collateral in dollar terms.

As soon as the limit is reached, whether due to new deposits or a rise in the price of existing deposits, no more deposits can be made. More importantly, when the limit is reached, the oracle price of each unit of collateral is also limited in order to preserve the global collateral value limit based on the deposited number of collateral tokens.

This mechanism functions regardless of oracle price, meaning that it is able to control collateral exposure even in the event of oracle price manipulation.

Thanks to collateral value limits, cross-margin pools are no longer as strong as their weakest collateral. Exposure to each collateral can be limited without reducing the collateral’s efficiency.

When collateral value limits are combined with fair loss distribution, lenders are able to make much more precise risk/reward calculations. They know how much they can expect to lose due to exposure to each collateral vs how much they can expect to earn based on the current interest rate and collateral fees.