Key Concepts
Core Insight
Standard lending markets usually treat collateral as simple token balances: ETH, BTC, stablecoins, or other ERC-20 assets. Avana is built for collateral that changes shape over time. LP positions can contain multiple assets, accrue fees, drift with price movement, become one-sided, or require a specific unwind path.
Because of that, Avana underwrites collateral at the LP market level. Each supported pool or LP family can have its own valuation logic, collateral factors, borrowable assets, liquidation assumptions, and risk limits.
Borrowing Model
Users deposit supported LP positions into a Borrow Spoke. The positions can remain active in their pools while the protocol takes custody for collateral accounting.
Each approved LP position is valued on its own. After collateral factors and pool risk controls are applied, its discounted contribution is added to borrowing capacity inside that Borrow Spoke.
When the user borrows, the spoke draws liquidity from the Hub. LP market risk stays in the spoke layer, while shared capital accounting stays at the Hub.
Oracle & Valuation
Avana prices LP collateral by reconstructing the position and valuing the assets inside it. For fungible LPs, the protocol derives value from external asset prices and pool balance reconstruction. For concentrated liquidity, it decomposes the position by liquidity, range, current tick, token exposure, and accrued fees.
The result is then discounted into recoverable collateral value. Borrow power is based on what the position can realistically support under the market's risk assumptions, not on an optimistic net asset value.
Avana uses a dual-oracle pricing framework for LP collateral. Chainlink price feeds provide the primary reference for the underlying assets, while AMM-derived TWAPs act as an independent verification layer sourced from onchain liquidity.
Borrowing Capacity
Borrowing capacity comes from the risk-adjusted value of approved LP positions inside a Borrow Spoke. Avana reconstructs each position, prices the underlying exposure, applies pool-level risk treatment, and then applies the market's collateral factor.
The Borrow Spoke reports that capacity to the Hub for enforcement. When a user has multiple approved positions in the same market, Avana aggregates their capacity while still valuing each position under its own pool, range, liquidity, and risk assumptions.
See Collateral Factors for how each market sets collateral factors, liquidation thresholds, and liquidation bonus per asset.
Health & Liquidation
Avana monitors account health inside each Borrow Spoke using the same valuation path that governs borrowing. Adjusted collateral value — already discounted through LP reconstruction, pricing, collateral factors, and recoverable-value assumptions — is compared against outstanding debt.
When health falls below the liquidation threshold, Aave handles debt accounting and the liquidation entry point against the ERC-20 vault collateral. Avana handles the LP settlement behind that vault token: burning vault collateral, mapping liquidation back to the real LP position, and following the market route to unwind, sell, auction, or transfer the backing position.
Fee Treatment
LP positions may keep accruing trading fees while they are used as collateral. Avana can recognize those fees in valuation and, subject to health checks, let users claim them without fully exiting the principal LP position.
Related docs: Price Oracles and Claim LP Fees.