# Dinero Market

### Dinero Markets

Users can create a stablecoin, Dinero, based on the value of their collateral. These are one-sided markets. The user is not borrowing Dinero from a supplier, but he is creating it through overcollaterization.
The market contracts evaluate the dollar value of the collateral using Chainlink oracles and mint new Dinero. The loans have no maturity as long as the user has enough collateral to cover the loan.
Note that we use the terms borrowing and creating interchangeably. The user is creating Dinero but can also be thought of as borrowing it from the protocol as some markets have an interest rate cost.

### Loan To Value

This is the most important ratio to pay attention to. It determines the minimum amount of collateral in USD a user must have to not be liquidated.
$LTV= (loan / collateral) * 100$
If a user deposits 1000 USD in BTC as collateral and borrows 400 Dinero, his position has an LTV of 40% as calculated by 400/1000 * 100.
If the market has a maximum LTV of 50%, a user with an LTV of 50% or below cannot be liquidated. However, if the value of collateral drops to \$799 due to the change in BTC's price, the loan is considered to be underwater and is exposed to liquidation. This is because 400/799 * 100 is around 50.1%, higher than the market maximum LTV of 50%.

### Interest Rate

The interest rate is expressed as an annual percentage and determines how much a user must pay to create Dinero.
Let us assume that there is a market with an interest rate of 5% and a user is currently borrowing 100 DNR. If the user decides to repay the loan one year later, he will have to repay 105 DNR.
$Repay = loan + (seconds * interestRate * loan)$
The market contracts calculate the interest rate every second. Therefore, the repayment amount equals the initial amount plus the number of seconds it has passed since the loan times the interest rate per second times the initial loan.
Some markets have an interest rate of N/A for not applicable. Those markets charge no fee to create Dinero. The repayment amount will always be the initial borrowed amount.

### Liquidations

When a user's LTV goes above the market maximum LTV, that user is at risk of liquidation. There are two ways this can happen:
• A substantial borrowing period accumulates a large borrowing cost from the interest rate
• The USD value of the collateral decreases.
Therefore, always maintain a conservative LTV. We recommend half of the market maximum. If your LTV starts to increase, consider repaying a portion of the loan or adding more collateral.
During liquidations, the loan is repaid using the collateral, and a fee in collateral is charged to the borrower. Let us imagine a user with 1000 USD BTC as collateral and a loan of 500 DNR in a market with an LTV of 50% and a liquidation fee of 10%. If the value of the collateral drops to 900. The LTV of the user would be 55.55% (500/900 * 100), which is higher than the maximum requirement of 50%.
A liquidator would charge the user 550 USD in collateral to swap for DNR to repay the 500 DNR loan. The remaining 50 USD in collateral would be paid as a reward to the liquidator for maintaining the integrity of the protocol.