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High Efficiency Mode (eMode) 🆕

Optimizing asset utilization for enhanced capital effficiency
The High Efficiency Mode or ”eMode” allows borrowers to extract the highest borrowing power out of their own collateral when they are borrowing assets that are correlated in price to their collateral. This can happen when they the two assets are derivatives of the same underlying (eg. stablecoins pegged to USD).
Entering eMode maximizes the capital efficiency of the borrower by allowing a higher value loan to be taken out.

How it works

eMode provides borrowers with greater leverage on their capital as long as they restrict their borrowing to a specific category of assets.
This “category” refers to a set of assets which are closely correlated in price (e.g., DAI, USDC, and USDT).
By selecting eMode, when a user supplies assets of the same category as his collateral, the borrowing power (LTV), and maintenance margin (Liquidation Threshold) are overridden by the eMode category configuration to allow for higher capital efficiency.
Collateral for users that enter eMode will have the following parameters modified:


Let us assume Carbon defines an eMode: Category 1 - (Stablecoins) as follows:
  • LTV: 97%
  • Liquidation Threshold: 98%
  • Liquidation Bonus: 2%
  • Assets: USDC, USDT
Bob chooses to enter this eMode, and supplies USDC (which normally has 85% LTV).
Bob can borrow assets in Category 1 (USDT, USDC and nothing else) with the borrowing power defined by the eMode category (97%). By using eMode, Bob's capital is 12% more efficient.
Note: Bob can still supply other non-Category 1 assets as collateral, but only assets that belong to the same eMode category will enjoy the improved parameters.