# Definitions

### Loan-to-value (LTV) ratio

The LTV ratio determines how much a user can borrow against their collateral. For example, if the LTV ratio for XRP is 75%, a user can borrow up to 75% of the value of their XRP supply position.

Generally speaking, the more stable an asset's price, the higher the LTV ratio would be.

### Liquidation threshold

The liquidation threshold determines the maximum percentage of value that can be borrowed against it. For example, if you supply $10,000 in XRP with an 80% liquidation threshold, the liquidation threshold in USD will be $8000. Then if you happen to have a debt of $8,000 in USDC, any more decline of XRP in USD or increase in the debt of USDC in USD will lead to liquidation.

### Reserve factor

This is the percentage of the interests paid by the borrowers that the protocol takes as a revenue. 

For example, if a borrower repays $30 of interest back to the protocol at 10% reserve ratio, the protocol takes $3 as a revenue, and forward $27 as deposit interests for all depositors.

## Supply and borrow caps

Caps encourage a balanced distribution of supplied and borrowed assets across multiple tokens, reducing over-reliance on a single asset.

### Supply cap

Supply cap limits the total amount of deposits for a certain asset that Strobe can take, effectively limiting its total exposure and overall risk.

### Borrow cap

A borrow cap ensures that the protocol always retains enough reserves to meet lender withdrawals and prevent excessive debt accumulation.

### Liquidation bonus

The liquidation bonus or liquidation penalty is a percentage of the collateral that is taken away from an underwater account to a liquidator upon successful liquidation.

For example, if $10 of debt in XRP is being repaid by a liquidator at a 10% bonus, they will be able to take away $10 + $1 = $11 in USDC from the bad debtor.

### Interest rate strategy contract address

For each asset, an interest rate strategy contract will be deployed. Each contract will have [different interest rate strategy parameters](https://strobe-protocol.gitbook.io/strobe-protocol/interest-rate-strategies/interest-rate-strategy-1#interest-rate-strategy-parameters).

### More relevant concepts

More relevant concepts are covered extensively in [health-factor-and-liquidation](https://strobe-protocol.gitbook.io/strobe-protocol/money-market/health-factor-and-liquidation "mention").