Asset Risk
The liquidity pools generated by Larix enable users to lend and borrow crypto tokens. To mitigate asset risk, Larix does not accept crypto tokens with a market capitalization under $10 billion and uses a dynamic interest rate model to avoid a ‘bank run’. Lenders/suppliers of assets generate and earn an APY as the liquidity pool generates interest bearing opportunities to assets. In addition, lenders/suppliers qualify to earn the protocol token, Larix, through what we refer to as ’mining‘. This process can be attributed to a portion of token distribution that rewards protocol users for their activity on the platform. Once assets are supplied, users can choose to allocate the aforementioned as collateral which can then be used to borrow against.
The asset risk can be attributed to reaching collateral borrowing thresholds, namely the collateral factor for the underlying borrowed asset.
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