Risk-Adjusted Borrowing Power

Risk-Adjusted Borrowing Power is the actual amount a user can borrow, calculated by applying risk parameters to their collateral. It is not simply the total value of the collateral, but the value after accounting for haircuts and collateral factors.

This metric ensures that the user's position remains solvent even under adverse market conditions. It is the primary limit for users interacting with lending protocols.

By standardizing this calculation, protocols can provide a consistent and transparent experience for all participants. Users must understand their borrowing power to avoid accidental liquidations.

It is a key concept in managing personal risk within decentralized finance. The protocol's risk engine continuously updates this power based on live market prices.

It represents the intersection of user intent and protocol safety requirements.