Instadapp Guides
  • Instadapp Pro Help Docs
  • Getting Started
    • Managing Assets on Instadapp
    • Simulation Mode
    • Debt Collateral Ratio
    • Custom Tokens
    • Authority
      • How to add an Authority to your Account
      • How to remove an Authority
      • Using Gnosis Safe as an Authority
    • FAQs
  • Smart Wallets
    • DeFi Smart Account (DSA)
      • Not able to see your wallet balance?
      • Depositing from your Connected Wallet into DSA
      • Migrating DeFi assets into your DSA
      • Withdrawing to your Connected Wallet
      • Advanced Withdrawals
      • Advanced Deposits
    • Avocado Wallet
      • 🥑Avocado Guides
  • Features
    • Cross Chain Bridge
    • Protocol Refinancing
    • Sweep Swap
    • Protection Automation
    • Private Transactions
      • How to enable ETH_Sign on Metamask
    • Quick Menu
    • Global Settings
  • Protocols
    • MakerDAO
      • Maker Protocol Explained
      • Liquidations on MakerDAO
      • More Maker Info
    • Compound
      • Compound Explained
      • Liquidations on Compound v2
      • Compound v3 Explained
      • Using Compound v3
    • AAVE
      • AAVE Protocol Explained
      • How to activate E-Mode
      • Migrate from v2 to v3
      • Get more E-Mode Accounts
    • Uniswap
      • Uniswap Protocol Explained
      • Managing Uniswap on Instadapp
      • Creating a Uniswap LP
      • Import / Export
      • Rebalancing your LP
      • How to Create Uniswap Rewards
      • Staking Uniswap LPs for Staking Rewards
    • Liquity
      • Liquity Protocol Explained
      • How to open a Trove and borrow LUSD
      • How to close a Trove
      • Liquidations on Liquity
      • Supply to the Stability Pool
      • Staking LQTY
    • Euler
      • Euler Protocol Explained
      • Using Euler
      • Debt and Collateral Transfer
    • Morpho Optimizer
      • Morpho Explained
      • Using Morpho
    • Morpho Blue
      • Morpho Blue Explained
      • Using Morpho Blue Borrow
      • Using Metamorpho
  • Strategies
    • Using Strategies
    • Compound Strategies
    • Leverage / Max Mining
    • Save / Unwind Mining
    • Collateral Swap
    • Debt Swap
    • Alternative Strategies
  • Governance
    • Voting and Governance
    • Snapshot
    • Atlas
  • Walkthroughs
    • Refinancing to Morpho
    • Migrate iTokens to AAVE DSA
    • Quick Start Primer
    • Metamask Tx Creation Issues
    • How to hard reset on Metamask
  • Dive Deeper
    • DeFi Smart Accounts
    • URLs by Network
Powered by GitBook
On this page
  • Max Debt to Collateral Ratio
  • D/C Ratio compared to Borrowing Factor
  • Borrow Limit used on Compound:
  • Debt to Collateral Ratio used on Instadapp:
  • Multiple Assets changes the Maximum Debt to Collateral Ratio
  • Liquidations are not different on Instadapp

Was this helpful?

  1. Getting Started

Debt Collateral Ratio

Learn more about how Instadapp displays risk parameters on DeFi protocols

PreviousSimulation ModeNextCustom Tokens

Last updated 2 years ago

Was this helpful?

Your position may look different on Instadapp, but Instadapp doesn't modify or change the underling protocol.

Instadapp GUI interacts with various lending protocols each lending protocol uses different math to show risk to the user. On the Instadapp Dashboard we show users risk in two ways:

  • Max Debt to Collateral Ratio

  • Heath Factor

Max Debt to Collateral Ratio

Debt to Collateral Ratio

Debt to Collateral is a simple formula. To find the debt to collateral ratio you divide the value of the outstanding debt to the value of the collateral.

$1000/$2000 = 50 %

Max Debt Ratio: How much credit?

Most protocols use Collateral Factor (or another term) which describes how much a user can borrow against their deposit. These parameters are usually determined by the asset time. For example: If Bitcoin has a Collateral Factor of 0.5 then a user can borrow up to 50% of its value. Collateral Factor is sometimes called Loan to Value on other platforms and services.

Maximum Debt to Collateral Ratio

The percentage at which liquidations occur is determined by the various collateral factors of the underlying assets. The average collateral factor of all the supplied assets becomes the Maximum Debt to Collateral Ratio.Hitting the Maximum Debt to Collateral Ratio in any protocol will trigger the liquidation process.

Each protocol has their own liquidations process please refer to the specific protocol to understand its unique liquidation process:

D/C Ratio compared to Borrowing Factor

Borrow Limit used on Compound:

How Compound Finance calculates its Risk Parameter

Debt to Collateral Ratio used on Instadapp:

How Instadapp calculates its Risk Parameter

In the example above only one collateral was used (wBTC) and its collateral factor is 60% Therefore, when the position hits 60% debt to collateral ratio it will reach liquidation.

Multiple Assets changes the Maximum Debt to Collateral Ratio

If there were multiple assets held then, the Maximum Debt is calculated by the collateral factor of the multiple assets based on weight.

For example: A Compound position that is half USDC and half wBTC has a Maximum Debt Ratio of 67%.

For example: A Compound position is 75% USDC and 25% wBTC has a Maximum Debt Ratio of 71%

Liquidations are not different on Instadapp

The price and position in which a user is liquidated is the same. Reaching the Borrow Limit on Compound, is functionally the same as hitting the Maximum Debt to Collateral Ratio on Instadapp. You can check this by calculating them together:

$1000 USDC * 85% = $850
This is the same position on Compound shown on Instadapp (left) and Compound (right)
Liquidations on MakerDAO
Liquidations on Compound v2
Liquidations on Liquity
used by AAVE