Collateral Framework
The Dualis collateral framework defines the risk parameters that govern borrowing capacity, liquidation thresholds, and penalty structures for each supported asset. The framework is designed for institutional-grade risk management while supporting a diverse range of collateral types including crypto assets, real-world assets, and tokenized invoices.
Per-Asset Collateral Parameters
Each asset accepted as collateral has three key parameters that determine its risk profile within the protocol:
- Loan-to-Value (LTV): The maximum percentage of collateral value that can be borrowed against. A lower LTV indicates higher perceived risk.
- Liquidation Threshold: The collateral ratio at which a position becomes eligible for liquidation. This is always higher than LTV, providing a buffer zone.
- Liquidation Penalty: The discount applied to collateral during liquidation, serving as both an incentive for liquidators and a deterrent for borrowers who allow positions to become undercollateralized.
| Asset | Collateral Tier | LTV | Liquidation Threshold | Liquidation Penalty |
|---|---|---|---|---|
| USDC | Crypto | 80% | 85% | 4% |
| wBTC | Crypto | 73% | 80% | 6% |
| wETH / ETH | Crypto | 75% | 82% | 5% |
| CC (Canton Coin) | Crypto | 75% | 82% | 5% |
| T-BILL (RWA-TBILL) | RWA | 85% | 90% | 3% |
| TIFA-REC | TIFA | 50% | 60% | 10% |
Collateral Tiers and Haircuts
Assets are grouped into three collateral tiers based on their liquidity profile, price discovery mechanisms, and settlement characteristics. Each tier applies a valuation haircut that reduces the effective collateral value used in health factor calculations:
| Tier | Haircut | Assets | Rationale |
|---|---|---|---|
| Crypto | 0% | USDC, wBTC, wETH, ETH, CC | Deep on-chain liquidity, real-time price feeds, instant settlement. No additional valuation discount required. |
| RWA | 5% | T-BILL (RWA-TBILL) | Backed by U.S. Treasury securities with high credit quality but limited on-chain liquidity. The 5% haircut accounts for redemption delays and potential NAV deviation. |
| TIFA | 20% | TIFA-REC (Tokenized Receivables) | Invoice-backed assets with counterparty credit risk and longer settlement cycles. The 20% haircut reflects illiquidity, credit risk, and potential recovery shortfalls. |
The effective collateral value used in all risk calculations is:
effectiveValue = marketValue * (1 - haircutRate) * LTV
For example, $100,000 of T-BILL collateral has an effective borrowing capacity of: $100,000 * (1 - 0.05) * 0.85 = $80,750.
Cross-Collateralization
Dualis supports cross-collateralization, meaning users can deposit multiple asset types into a single collateral portfolio. The protocol computes a unified health factor across all deposited collateral and all outstanding debt positions.
This provides several advantages for institutional borrowers:
- Capital efficiency: A diversified collateral basket produces a blended LTV that is often higher than any single-asset position, because the portfolio benefits from asset decorrelation.
- Risk distribution: A price drop in one collateral asset may be offset by stability in another, reducing the probability of liquidation compared to single-asset collateral.
- Operational flexibility: Institutions can post the collateral they have available rather than acquiring specific assets, reducing friction and transaction costs.
Health Factor Calculation
The health factor (HF) is the primary risk metric for every borrowing position. It is defined as:
HF = Sum(collateralValue_i * liquidationThreshold_i * (1 - haircut_i)) / totalBorrowValueUSD
A health factor above 1.0 means the position is solvent. As it approaches 1.0, the position enters the margin call zone. Below specific thresholds, the protocol initiates graduated liquidation (see Liquidation Engine).
The protocol recalculates health factors continuously as oracle prices update. Institutions with higher credit tiers receive earlier warning alerts, giving them more time to add collateral or reduce debt before liquidation triggers.