Collateral

Collateral refers to the assets deposited by users to secure loans in USDS.

The collateral ratio is a critical parameter that represents the relationship between the dollar value of the collateral in a user's position (or Trove) and the debt owed in USDS. This ratio fluctuates over time due to changes in the price of LSD, the collateral asset in this case. Users can actively influence their collateral ratio by adding more LSD/ or repaying a portion of their USDS debt.

For instance, if the current price of a ETH liquid staking token (ETH LST) is $3,000 and a user deposits 1 ETH LST to borrow 1,000 USDS, their collateral ratio would be 300% ($3000 / $1000). However, if the user borrowed only 600 USDS, the collateral ratio would be 500% ($3000 / $600).

By monitoring and managing their collateral ratio, users can ensure the stability and security of their positions within the Sable Finance ecosystem.