Health Factor

Your Health Factor

To manage risks effectively, Kinetic advises users to monitor their loan's health factors closely. Borrowers should be proactive in managing their positions and consider repaying or depositing additional assets if their health factor declines. Staying informed about blockchain developments and the assets used as collateral can help users make informed decisions.

How Health Factor is Calculated

The Health Factor (HF) measures how safe a user's borrowed funds are compared to their supplied collateral. The formula is:

Important: Each asset has a Collateral Factor, meaning only a percentage of its value counts toward your borrowing power.

Example Calculation:

  • Collateral Factor:

    • sFLR: 70%

    • USDC: 80%

  • User Supplied Assets:

    • sFLR: $2,000

    • USDC: $1,500

    • Total Collateral: $3,500

  • Borrow Limit Calculation:

  • User’s Actual Borrow: $1,500

  • Health Factor Calculation:

If a user's Health Factor drops to 1, they risk liquidation. In this example, that happens when their borrow amount reaches $2,600.

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