Yields & Returns

LTV

Loan-to-Value Ratio

Percentage of collateral value that can be borrowed

Definition

LTV ratio represents the percentage of collateral value that can be borrowed. A lower LTV means more conservative lending, while higher LTV increases liquidation risk.

LTV (Loan-to-Value Ratio) is a yield term used to understand Percentage of collateral value that can be borrowed. In practice, it matters because it affects how users evaluate protocols, compare opportunities, and avoid hidden assumptions.

Example

With 75% LTV, you can borrow up to $750 against $1000 of collateral.

How it works

In practice, the concept shows up like this: With 75% LTV, you can borrow up to $750 against $1000 of collateral.

Why it matters

LTV matters because small misunderstandings in DeFi can turn into bad pricing, liquidation, governance, custody, or smart-contract risk. A good mental model helps you compare protocols without relying on marketing language.

What to check

Treat it as a yield concept: separate sustainable revenue from temporary incentives, and always ask who pays the yield. The main checks are: Liquidation risk; Market volatility; Sudden LTV changes.

Risks to Consider

Liquidation risk
Market volatility
Sudden LTV changes

Common Questions

What does LTV mean in DeFi?

LTV means Percentage of collateral value that can be borrowed. The useful question is not only the definition, but how the mechanism changes risk, return, liquidity, or governance for the user.

How is LTV used in practice?

A practical example: With 75% LTV, you can borrow up to $750 against $1000 of collateral.

What should I check before relying on LTV?

Check liquidation risk, market volatility, sudden ltv changes. Also verify liquidity, oracle assumptions, admin controls, and whether the protocol has been tested during stressed markets.