To borrow RUSD through the RIME Protocol, users must provide collateral in the form of CFX. The collateral requirements are designed to ensure the stability and security of the RUSD stablecoin and protect the interests of both borrowers and the RIME ecosystem.
The RIME Protocol requires borrowers to maintain a minimum collateral ratio for their loans. This ratio is calculated as the total value of the collateral divided by the amount of RUSD borrowed. The minimum collateral ratio ensures that loans are overcollateralized, providing a buffer against market volatility and reducing the risk of undercollateralized loans.
For example, if the minimum collateral ratio is 150%, and a user wants to borrow 100 RUSD, they must provide at least 150 USD worth of CFX as collateral.
If the collateral value falls below the minimum required ratio, the loan becomes at risk of liquidation. Liquidation is a process where the RIME Protocol automatically sells a portion of the borrower's collateral to repay the outstanding RUSD debt and restore the collateral ratio.
To avoid liquidation, borrowers should monitor their collateral ratios and add more collateral or repay a portion of their RUSD loans if necessary. It's essential to consider the volatility of the collateral assets and maintain a sufficient buffer above the minimum collateral ratio.
RIME Protocol provides an intuitive interface for users to manage their collateral. Users can easily add or remove collateral, repay RUSD loans, and check their current collateralization ratios. To learn more about managing collateral, please refer to the How to Manage Collateral guide.
In summary, maintaining an adequate collateral ratio is crucial for borrowers using the RIME Protocol. By carefully managing their collateral, users can minimize the risk of liquidation and maximize the benefits of borrowing RUSD.