# For Borrowers & Farmers #### Phase 1: Feasibility & Capacity Analysis **User Intent:** Determine if the protocol can support the target strategy size and complexity. | Key Question | System Answer | Sitemap Component | | ---------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | **"What constrains position size?"** | **Liquidity & Exposure Limits.** Capacity is bounded by two distinct factors: 1) Global liquidity availability in the Pool, and 2) Strategy-specific Debt Ceilings defined by the Curator. | [pool](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/core-architecture/pool) \
[risk-configuration-dictionary](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/reference/risk-configuration-dictionary) | | **"What are the primary risk vectors?"** | **Risk Vector Identification.** Borrowers face three primary threats: 1) **Market Risk** (Collateral volatility), 2) **Rate Risk** (Utilization-driven cost spikes), and 3) **Liquidity Risk** (Inability to exit via external DEX liquidity). | [liquidation-dynamics](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/economics-and-risk/liquidation-dynamics) | | **"Is the target collateral eligible?"** | **Collateral Allowlist.** Each Credit Manager enforces a strict allowlist of assets. Tokens not explicitly whitelisted cannot be held within the Credit Account. | [credit-suite](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/core-architecture/credit-suite) | #### Phase 2: Cost of Carry Modeling **User Intent:** Model the dynamic cost of capital to project net yield and volatility exposure. | Key Question | System Answer | Sitemap Component | | ---------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | | **"What drives the base rate?"** | **Interest Rate Model.** Rates are dynamic and determined by **Pool Utilization**. Large withdrawals by LPs can cause immediate utilization spikes, increasing the cost of capital. | [interest-rate-model](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/economics-and-risk/interest-rate-model) | | **"Are there asset-specific premiums?"** | **Quota Rates.** Illiquid or high-volatility collateral assets may carry an *additional* interest premium (Quota Rate) imposed by the Quota Keeper, independent of the base pool rate. | [quota-controls](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/economics-and-risk/quota-controls) | | **"What is the protocol take rate?"** | **Interest Fee.** The Curator and DAO capture a fixed percentage of the interest paid. This markup is additive to the base rate paid to LPs. | [risk-configuration-dictionary](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/reference/risk-configuration-dictionary) | #### Phase 3: Solvency & Liquidation Mechanics **User Intent:** Define the liquidation boundary and the economic consequences of insolvency. | Key Question | System Answer | Sitemap Component | | ------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------- | | **"What triggers liquidation?"** | **Liquidation Triggers.** Insolvency can result from: 1) Collateral depreciation, 2) Debt asset appreciation, or 3) **Accrued Interest** (Rate spikes eroding the Health Factor). | [liquidation-dynamics](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/economics-and-risk/liquidation-dynamics) | | **"What is the penalty structure?"** | **Liquidation Premium.** Upon liquidation, the borrower forfeits a fixed percentage (e.g., 5%) of the liquidated collateral to the third-party liquidator. | [liquidation-dynamics](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/economics-and-risk/liquidation-dynamics) | | **"Are automated mitigations available?"** | **Partial Liquidation & Deleverage.** The protocol supports partial liquidations to restore solvency without full closure. Automated deleveraging tools can be utilized to maintain the Health Factor. | [liquidation-dynamics](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/economics-and-risk/liquidation-dynamics) | #### Phase 4: Governance & Parameter Risk **User Intent:** Assess the risk of adverse parameter changes by the market operator. | Key Question | System Answer | Sitemap Component | | ------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | | **"Can parameters change mid-trade?"** | **Parameter Risk.** Yes. Curators can modify Liquidation Thresholds (LTVs). However, these changes are subject to a mandatory **Timelock**, providing a window for borrowers to adjust or exit. | [risk-configuration-dictionary](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/reference/risk-configuration-dictionary) | | **"What are the operational circuit breakers?"** | **Smart Oracles & Pauses.** 1) Significant deviation between Main and Reserve price feeds will block operations. 2) Admins retain the ability to pause Credit Managers in emergency scenarios. | [smart-oracles](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/economics-and-risk/smart-oracles) | | **"Can access be revoked?"** | **Access Control.** Curators can forbid specific tokens or adapters, preventing borrowers from increasing exposure to those assets. | [market-curators](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/governance-and-operations/market-curators) | #### Phase 5: Position Unwind & Liquidity Dependencies **User Intent:** Evaluate the reliability of exit mechanisms under stress. | Key Question | System Answer | Sitemap Component | | ------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | | **"What are the execution dependencies?"** | **External Liquidity.** The "Atomic Close" relies on external DEX liquidity (e.g., Curve/Uniswap) to swap collateral for the debt asset. Thin liquidity or high slippage can cause repayment transactions to revert. | [adapters-integrations](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/core-architecture/adapters-integrations) | | **"What is the contingency procedure?"** | **Manual Unwind.** If atomic execution fails, the borrower must manually withdraw collateral (subject to solvency checks), execute swaps externally, and repay the debt. | [credit-suite](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/core-architecture/credit-suite) | \