Dolomite collateral backs separate loans within asset-specific risk limits.
Dolomite collateral backs loans in separate borrow positions, with borrowing limits set by the assets and applicable risk settings. A deposit in a Dolomite Balance does not automatically secure every loan. Eligible assets must belong to the position that carries the debt. Loan-to-value, or LTV, compares debt value with collateral value, while position health reflects the applicable collateralization rules. Asset restrictions can exclude a borrowing combination even when its value looks sufficient. Changing prices, accrued interest and altered risk settings can also reduce borrowing room. Collateral selection therefore affects both access to credit and the assets that a liquidation may take.
The short version: A collateral swap can change borrowing room even when asset values are similar, because risk settings vary.
Asset eligibility before additional borrowing
Collateral eligibility determines which assets can support a larger loan before their market value enters the calculation. Each market has its own oracle and risk settings. Even eligible collateral cannot override a closing debt market, an applicable borrow cap or unavailable token liquidity. Those restrictions concern credit availability as well as the position’s backing.
A collateral-only designation prohibits borrowing that asset. Where supported, Borrow-Only mode excludes the asset from collateral while allowing supply for interest. These settings distinguish an asset’s lending role from its ability to secure credit.
Single Collateral With Strict Debt makes the designated asset the position’s sole collateral and limits its permitted debt assets. Configured debt groups may have different LTV requirements, and a position cannot mix groups that the configuration keeps separate. On Arbitrum, this form of restriction applies only to Isolation Mode assets.
Isolation Mode restricts accompanying collateral and debt according to the asset’s configuration. A position cannot combine two Isolation Mode assets. Increasing collateral cannot authorize an excluded borrowing combination.
How do LTV and health factor set borrowing limits?
LTV measures debt relative to collateral, while health factor measures the position against the applicable liquidation boundary. Plain LTV equals total oracle-valued debt divided by total oracle-valued collateral, expressed as a percentage. Minimum collateralization reverses that relationship: it measures the collateral required relative to debt. Those percentages therefore describe different sides of the same relationship.
Under its standard risk calculation, Dolomite divides each market’s supplied value by one plus its margin premium. It multiplies each debt market’s borrowed value by one plus its margin premium. These adjustments can reduce borrowing capacity compared with a calculation using unadjusted values. The relevant inputs include the debt assets, so the collateral asset’s displayed limit alone may not describe the entire position. Dolomite’s Stats page shows current market limits; check the app’s projected position health and applicable risk settings before borrowing.
Automatic E-Mode changes risk settings when a position’s complete asset composition qualifies for a configured category. It applies on Ethereum and Berachain, with category membership and parameters that can change. Arbitrum, Mantle and X Layer do not support this feature. A nonzero margin-ratio override replaces the standard margin-premium treatment. Adding an asset outside the category can return the position to default settings.
A health factor below 1 makes a position eligible for ordinary liquidation. A higher factor reflects the present balances and risk calculation; it does not freeze the position’s future borrowing capacity.
Collateral allocation across separate positions
A borrow position contains the collateral that backs its own debt, separate from other positions and the Dolomite Balance. Its account record identifies the relevant balances, rather than treating every token associated with the wallet as a common reserve. Liquidation of one position therefore does not automatically consume collateral in another position. Uncommitted supplied assets also remain outside that position’s collateral pool. This separation concerns position accounting and liquidation exposure; positions still share the protocol and any dependencies of the assets they contain.
A smaller loan or additional collateral
Consider a hypothetical comparison with collateral worth $1375, intended debt worth $825 and unchanged oracle prices during the calculation. One option adds eligible collateral worth $210, bringing the collateral total to $1585. Another keeps the original collateral and reduces intended debt to $715. The original LTV is 825 divided by 1375, or 60%. Adding collateral produces approximately 52.05%; reducing the loan produces 52%.
Both options must satisfy the same borrowing conditions: permitted asset combinations, adequate health under the live risk settings and available borrowing capacity. These calculated percentages establish no protocol-wide LTV limit. Assume both options qualify. The borrower chooses the smaller loan to keep the additional assets outside the position, then borrows through a supported internal transfer into the Dolomite Balance. Successful execution records the debt in the chosen position and credits the receiving balance with the borrowed tokens.
Check the chosen position’s debt record and the credit in the receiving Dolomite Balance; a signature or transaction submission alone does not establish those changes. The dollar figures describe oracle valuations, while the obligation remains denominated in the borrowed token. Price movements, interest accrual or changed risk settings can invalidate the comparison’s assumptions. The position then needs a fresh health calculation, even though the original arithmetic was correct.
Oracle values and collateral taken in liquidation
Oracle valuation determines the collateral and debt values that Dolomite uses when assessing a position. Each market specifies its price oracle. A wrapped or yield-bearing asset may require conversion calculations as part of its valuation. Its displayed market value, accrued rewards and usable collateral value can represent different things. Unclaimed rewards should not automatically count toward borrowing room unless the position’s accounting and valuation include them.
Falling collateral prices can weaken health, and rising debt-asset prices can have the same effect. Borrowing interest adds to the token obligation as it accrues. Liquidation penalties increase the collateral that a liquidation takes to repay a given debt amount. The applicable penalty can depend on both markets and an account-specific override. A collateral swap can therefore alter liquidation costs alongside borrowing capacity, even when the replacement has a similar market value.
Partial liquidation eligibility depends on the collateral market and position health. A borrower cannot assume liquidation will always close only part of a loan or leave a particular collateral amount untouched.
Collateral swaps and loan exits
Collateral management can change asset exposure through supported swaps or release assets as the loan permits. Zap supports swaps and repayment inside borrow positions. The replacement asset must fit the position’s composition rules, and the resulting balances must satisfy its risk settings. Swap output affects both the remaining collateral and any debt that the operation repays. An attractive conversion quote alone does not establish a healthy final position.
Removing collateral while debt remains reduces the assets securing that debt. Full release requires repayment of every outstanding debt balance, including accrued interest. Returning collateral to the Dolomite Balance changes its account allocation; sending tokens to a wallet requires a withdrawal. Available token liquidity and restrictions of an integrated asset can affect that withdrawal, even after the borrowing obligation ends.
An assigned forced-expiration deadline creates a separate exit requirement. After that deadline, an eligible position can face forced closure even with a health factor above 1.
Your questions, answered
Does collateral earn lending interest while backing a Dolomite loan?
Eligible supplied collateral can earn lending interest while it backs a borrow position. The market’s supply rate determines that income, and a positive balance does not guarantee a nonzero rate. Rewards from an integrated asset are a separate mechanism. Neither income stream automatically cancels the interest that accrues on borrowed assets.
Which collateral balance matters when interest has accrued?
The interest-adjusted token balance matters when valuing collateral and debt. Dolomite distinguishes principal accounting, called Par, from actual token amounts, called Wei. Market interest indexes connect them. A principal record can remain unchanged while the actual supplied or owed token amount grows, so comparing principal figures alone can misstate the position.
Is token approval enough to make an asset collateral?
Token approval authorizes a permitted contract to transfer tokens; it does not itself allocate collateral to a borrow position. A completed deposit or internal transfer must establish the relevant account balance. The asset must also satisfy collateral and composition restrictions. An allowance therefore cannot demonstrate that a loan has additional backing.
Are direct transfers between Isolation Mode borrow positions permitted?
The BorrowPositionRouter restricts transfers of the underlying Isolation Mode asset to movements between the default account and a non-default account. It rejects a direct transfer between two non-default positions. Other assets in an isolation vault follow different transfer restrictions, so the underlying collateral’s route does not describe every balance in that vault.
Can one market represent both collateral and debt in the same position?
Dolomite records a net balance for each market within an account, so that balance represents supply or debt. Adding tokens of an owed market first reduces its negative balance. Only a positive remainder can represent supplied collateral, subject to eligibility rules. Balances in separate accounts remain distinct, even when they involve the same token.
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