Fundamentals
Last updated
Last updated
As a liquidity provider on Tectonic, you can deposit supported crypto assets into the protocol to earn passive interest. Your deposits are added to a shared liquidity pool, managed by smart contracts. These pooled funds are then made available to borrowers on the platform.
You can withdraw your supplied assets at any time, as long as there’s enough liquidity in the pool.
When you supply assets, you receive tTokens (e.g., tETH, tUSDC) in return. These tokens represent your share in the pool and can be redeemed for your original assets plus interest.
The value of your tTokens increases over time as interest accrues—this is based on supply and demand dynamics within the protocol.
Tectonic allows users to borrow supported cryptocurrencies by using their supplied assets as collateral. These borrowed assets can be used however you like—whether for trading, farming, or participating in other DeFi opportunities.
Each asset used as collateral has a (also known as Loan-to-Value, or LTV). This determines how much you can borrow. For example, a 75% Collateral Factor means you can borrow up to 75% of the value of your deposited asset.
If the supplied collateral drops in value, or the borrowed assets increase in price, you could exceed the Collateral Factor and may be at risk to be . When this happens, a portion of your debt may be liquidated—meaning the protocol sells part of your collateral to repay the loan. The amount liquidated depends on the asset and market conditions.
To avoid liquidation, you can:
Add more collateral (supply more assets), or
Repay part of your loan.
Borrowed assets accrue interest over time. Interest is compounded and you can repay your loan at any point.
Collateral Factors for each asset are set based on asset characteristics, such as availability in the reserve and asset’s liquidity in the market. These parameters are currently determined by the Tectonic team. However as the protocol matures and the necessary processes are in place, the governance of these parameters will be opened to the community via Tectonic’s governance process.
To help protect users from unexpected liquidations, Tectonic applies a 10% safety cushion to all collateralized assets. This cushion reduces the risk of your loan being liquidated due to sudden price changes or market volatility.
Instead of borrowing up to the full Liquidation LTV, you can only borrow up to 90% of it, giving you a buffer zone. This is known as the Maximum Eligible LTV.
Example
If CRO's Liquidation LTV = 80% Then, CRO's Maximum Eligible LTV = 90% * 80% = 72%
So, borrowers can only borrow up to 72% of their CRO collateral value, even though liquidation would only occur at 80%.
This cushion also applies when users withdraw collateral. If the post-withdrawal LTV exceeds the Maximum Eligible LTV, additional repayment will be required before the withdrawal can go through.
Maximum Eligible LTV () = 90% * Liquidation LTV
An example of this can be found in Step 2
