# Collateralization Requirements

#### **Over-Collateralization**

Borrowers must lock collateral worth more than the borrowed amount to protect the protocol against default.

* **Example:** If the collateralization ratio is 150%, a user borrowing $100 must lock $150 worth of collateral.

#### **Dynamic Collateralization**

The required ratio varies depending on the asset's volatility:

* **Stablecoins** may have lower collateralization ratios due to reduced volatility.
* **Volatile Assets** require higher collateralization ratios to mitigate risk.

#### **Borrower Evaluation**

The protocol assesses borrowers using:

* Historical data
* Credit scoring
* Behavior analysis

This ensures appropriate lending terms and collateral requirements.

#### **Risk-Based Parameters**

Lending parameters, such as loan-to-value (LTV) ratios and interest rates, are customized based on individual borrower risk profiles. This promotes responsible borrowing and reduces default risks.

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