Collateral Options on Juncta
When you open a borrowing position on Juncta, you need to provide collateral to secure your loan. There are two ways to do this:- you can use an existing LP position as collateral,
- or you can deposit separate assets as collateral.
Using Your LP Position as Collateral
If you already have an active LP position on Juncta, you can use it as collateral to borrow against without closing or withdrawing from the pool. Your position continues to earn yield while it secures your loan. Juncta applies a 70% collateral factor to LP positions. This means that for every 7,000. The collateral factor is set conservatively because LP positions carry the risk of impermanent loss that a simple token deposit does not — the value of your position can change as the underlying asset prices move.Because the value of your LP position moves with the market, your health
factor can change even if you do not take any action. Monitor your health
factor regularly, especially during volatile market conditions.
What happens to your LP position while it is used as collateral
Your LP position continues to operate normally while it is used as collateral. It keeps earning trading fees when its bins are active and lending yield when its bins are inactive. Using your position as collateral does not pause or affect the yield it generates.When to use this option
Using your LP position as collateral is well suited for situations where you want access to liquidity without closing your position. Instead of withdrawing from the pool and giving up your yield, you borrow against the position and repay the loan when you are ready. Your position stays open and keeps earning throughout.Depositing Separate Collateral
If you do not have an existing LP position, or if you prefer to keep your LP position independent from your borrowing activity, you can deposit separate assets as collateral. The collateral factor applied to your deposit depends on the specific asset you are depositing and its associated loan-to-value ratio (LTV).What happens to your deposited collateral
Unlike your LP position, separately deposited collateral does not earn yield while it secures your loan. It sits in the protocol as security for your borrow. The value of your collateral still fluctuates with the market price of the deposited asset, which means your health factor can change over time even without any action on your part.When to use this option
Depositing separate collateral is the more straightforward option if you want a clean separation between your liquidity provision activity and your borrowing activity. It is also the right option if you do not currently have an LP position on Juncta and need collateral to open a borrow.Understanding Your Health Factor
Regardless of which collateral option you choose, every borrowing position on Juncta has a health factor. This is a single number that tells you how safe your position is at any given moment. It is calculated as follows: Health Factor = (Collateral Value × Collateral Factor) ÷ Outstanding Borrow Value A health factor above 1.2 means your position is healthy. As the value of your collateral falls relative to your outstanding borrow — either because the underlying asset price dropped or because interest has accrued — your health factor decreases. If it falls below 1.2, the protocol begins a gradual soft liquidation process to reduce your risk before a full liquidation becomes necessary.You can improve your health factor at any time by repaying part of your
outstanding borrow or by adding more collateral to your position.
Comparing the Two Options
| LP Position as Collateral | Separate Collateral | |
|---|---|---|
| Collateral factor | 70% of position value | Depends on the asset |
| Earns yield while securing loan | Yes | No |
| Affected by impermanent loss | Yes | No |
| Requires an existing LP position | Yes | No |
| Health factor changes with market | Yes | Yes |