Users who want to borrow any assets from RiFi must have collateral locked on the protocol. Once these assets are supplied, you can borrow a maximum amount based on the collateral factor of the asset, which ensures the system is over collateralized. These collateral factors are determined by the protocol based on various parameters, which will be discussed later. For example, if the user has $100,000 in BTC supplied to the RiFi protocol, that means they can borrow up to 75% of the value. However, if a user’s collateral value drops below the collateral factor a certain asset has, it could cause a liquidation event.
Borrowers will pay an interest rate as a borrowing cost. To return the collateral, the user must pay off their origination balance and interest back to the protocol. Market interest rates are dynamic and determined differently by the market utilization of a specific asset.