🟣 DeFi Day 89: Aave Risk Parameters: LTV, Liquidation Threshold & Health Factor Today, let's understand three important parameters that help protect Aave's lending markets. 🛡️ 1\. LTV — Loan-to-Value LTV determines how much you can borrow against your collateral. Example: If you deposit $1,000 worth of ETH and the maximum LTV is 75%, you could borrow up to $750, subject to other restrictions. 2\. Liquidation Threshold This defines the collateral-value threshold at which your position can become eligible for liquidation. It is generally higher than the maximum LTV, giving borrowers some room before liquidation risk begins. 3\. Health Factor The Health Factor indicates how safe your borrowing position is. * Above 1: Not currently eligible for liquidation based on the Health Factor. * At or below 1: The position can become eligible for liquidation. The actual outcome depends on the protocol's rules and market conditions. Why does this matter? A falling collateral price or increasing debt can push your Health Factor toward 1. DeFi insight: LTV controls borrowing power. The liquidation threshold defines the danger zone. Health Factor helps you monitor the risk. Understanding all three is essential before borrowing on Aave. 🚀