Key Financial Ratio

What are the key ratios used to determine borrowing limits?

Debt-to-Liquidation (DTL) ratio must be less than 75%. Read here for more details.

What is “liquidation value” and how is it calculated?

Liquidation value is the estimated worth of an SP's miners if their sectors were terminated, accounting for penalties and other losses. It is computed as:

$$LiquidationValue = MinerBalance - MinerMaxTerminationPenalty$$

$$MinerBalance = AvailableBalance + VestingBalance + InitialPledge$$

How is the Debt-to-Liquidation (DTL) ratio calculated?

DTL is computed as:

$$DTL = Debt / LiquidationValue$$

If I try to borrow and withdraw 10,000 FIL, and borrow from sealing, how much can I still borrow from GLIF?

To determine how much you can borrow from GLIF, you need to understand the Debt-to-Liquidation (DTL) ratio. DTL ratio must be less than 75%. Read here for more details. The DTL ratio is calculated as:

$$DTL = Debt / LiquidationValue$$

Let's take a look at how borrowing for sealing and withdrawing affect your DTL ratio:

1. Borrowing FIL for sealing:

   • When you borrow FIL for sealing, the borrowed amount is added to your Agent.

   • You keep the FIL within your Agent and its miners.

   • Both your debt and liquidation value increase by the borrowed amount.

Pledged FIL from sealing incurs a hypothetical "termination fee" - which is the amount of FIL that would be lost in a liquidation scenario. As a result, using borrowed FIL for sealing slightly decreases the Agent's liquidation value. However, the Agent's liquidation value increases every time one of its miners' earns a block reward.

1. Borrow FIL for withdrawing:

   • When you borrow FIL for withdrawing, the borrowed amount is removed from your Agent.

   • Your debt increases, but your liquidation value decreases by the withdrawn amount.

Your DTL will gradually rise as interest accumulates.

Key Takeaways:

Borrowing FIL for sealing on one of your Agent's miners allows you to get higher leverage - withdrawing FIL from your Agent significantly increases its DTL. Always remember to keep your DTL under 75%.

For detailed uses of borrowed FIL, read here for more details.

Example:

Let's imagine the following scenario:

• Agent Debt: 100 FIL

• Agent Liquidation Value: 200 FIL

• DTL: 50%

If you borrow 100 FIL:

• New Agent Debt: 200 FIL

• New Agent Liquidation Value: 300 FIL

• New DTL: 66% ✅

Now, if you use that 100 FIL for sealing, your DTL remains at 66%, allowing you to borrow more while the DTL is within 75%.

However, if you decide to withdraw 100 FIL instead:

• Agent Debt: 200 FIL

• Agent Liquidation Value: 200 FIL

• DTL: 100% ❌

In this case, you cannot withdraw 100 FIL because the DTL is above 75%.

As you can see, withdrawing the FIL increases your DTL ratio much faster, which can limit your borrowing capacity.