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Term Structure Institutional Docs
TermMax DocsTerm Structure Institutional Docs
Term Structure Institutional Docs
TermMax DocsTerm Structure Institutional Docs
  • overview
    • Introduction
    • Architecture and Roles
    • Fireblocks Embedded Wallet
  • Features
    • Supported Networks and Tokens
    • Organization Account and Wallet
    • Passphrase and MPC Key
    • Borrowing and Lending
    • Repayment
    • Liquidation
    • Adding and Removing Collateral
    • Withdrawal
    • Settlement Mechanism
    • Transaction Fee
  • Security
    • Security Overview
    • Account and MPC Key Share Security
    • Cloud Infrastructure Security
    • Full Key Recovery
    • Disaster Recovery for Fireblocks Key Share
  • Tutorials
    • MPC Key Generation
    • Wallet Creation and User Invitation
    • Joining Organization
    • Borrowing and Lending
    • Repayment
    • Liquidation
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  • Why Adjust Collateral?
  • How to Add/Remove Collateral
  • Important Considerations:
  1. Features

Adding and Removing Collateral

Why Adjust Collateral?

  • Increase Health Factor: Adding collateral can increase your health factor, making your loan position more resistant to liquidation. This is beneficial if you anticipate potential market volatility that could decrease the value of your existing collateral.

  • Capital Efficiency: Removing collateral can free up capital for other uses, such as reinvesting or deploying it in other opportunities. However, the remaining collateral after removal should still maintain a healthy level and not hit the Liquidation Loan-to-Value (LLTV) ratio.

How to Add/Remove Collateral

Removing Collateral:

This section explains how to remove collateral associated with your loans on the TSI platform.

  1. Initiate Removal: Borrowers can initiate the collateral removal process through the TSI platform.

  2. Automated Transfer: Once the borrower initiates the removal and the smart contract receives the transaction, the informed TSI system automatically unlocks the specified amount of collateral in the lender's wallet and allow the contract executes the transfer to the borrower's wallet. This transfer is based on the lender's pre-approval after the loan is successfully created.

  3. On-Chain Update: The smart contract updates the collateral amount associated with the loan. This ensures that the updated collateral information is used for any future liquidation calculations.

Adding Collateral:

  1. Initiate Addition: Borrowers can initiate the collateral addition process through the TSI platform.

  2. Collateral Transfer: The borrower initiates a transaction to transfer the desired amount of additional collateral to the lender's wallet. This transaction is sent to the smart contract for execution.

  3. Collateral Deposit and Lock: The smart contract executes the transaction, transferring the collateral to the lender's wallet and locking it.

  4. On-Chain Update: The smart contract updates the collateral amount associated with the loan, ensuring that the updated information is used for any future liquidation calculations.

Important Considerations:

  • Loan-to-Value (LTV) Ratio: When adding or removing collateral, be mindful of the LTV ratio. Ensure that your loan remains sufficiently collateralized to avoid liquidation.

  • Risk Management: Carefully assess the risks before removing collateral. A lower health factor increases your vulnerability to liquidation if the market moves against your position.

  • Monitoring: It is crucial to monitor your loan status and the value of your collateral, especially after adjusting your collateral levels.

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