> For the complete documentation index, see [llms.txt](https://docs.tydro.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.tydro.com/i.-introduction/overview/lending-and-borrowing-basics.md). # Lending & Borrowing Basics A short primer on the mechanics behind Tydro ### Supplying When a lender supplies an asset to a market, it becomes available for borrowers, and the lender earns interest paid by borrowers. Supplied assets are not locked. A lender can withdraw as long as the market holds enough free liquidity. ### Borrowing To borrow, a borrower first posts collateral. The borrower can then borrow another asset up to a limit set by the collateral's loan-to-value ratio. Borrowing accrues interest, which the borrower repays with the principal. In Tydro's launch market, a borrower posts kBTC as collateral and borrows USDC. See [Isolated Markets](/ii.-core-concepts/markets/isolated-markets.md). ### Collateral and health Each collateral asset carries two key parameters: * **Loan-to-value (LTV):** the most a borrower can borrow against the asset, as a share of its value. * **Liquidation threshold (LT):** the point at which a position becomes eligible for liquidation. A borrower's position has a health factor that summarizes how close it is to liquidation. Above 1 is safe. At or below 1, the position can be liquidated. ### Interest rates Borrow and supply rates move with utilization, the share of supplied liquidity currently borrowed. Rates rise as utilization rises. The curve is set per market. Tydro V2's first launch market use a flat borrow rate that does not change with utilization, so a borrower holds a fixed rate with no maturity. The supply side floats: a lender earns a yield that varies with utilization, the share of supplied liquidity currently borrowed. ### Liquidation If a position's health factor falls to 1 or below, a liquidator can repay part of the debt and receive an equivalent amount of collateral plus a bonus. This keeps the market solvent. See [Liquidations](/ii.-core-concepts/liquidations-and-risk-management.md). {% hint style="warning" %} Borrowing carries liquidation risk. If your collateral falls in value or your debt grows, you can lose collateral to liquidation. Monitor your health factor. {% endhint %} --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://docs.tydro.com/i.-introduction/overview/lending-and-borrowing-basics.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.