> For the complete documentation index, see [llms.txt](https://docs.vena.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.vena.finance/welcome/core-concepts.md). # Core concepts A short primer on how lending works on Vena. ## Supplying and earning Supplying an asset to Vena means depositing it into a shared pool. In return, suppliers receive aTokens, interest-bearing receipts that accrue yield in real time and are redeemable for the underlying asset plus accumulated interest. Supply APY is determined by how much of the pool is being borrowed: the higher the utilisation, the higher the rate paid to suppliers. Supplied assets are immediately available for other users to borrow, which is how the yield is generated. ## Borrowing and paying interest Borrowing against a supplied position unlocks liquidity without selling the underlying. Borrowers post collateral, then draw a loan from the pool in the asset of their choice. Interest accrues in real time on the outstanding debt and is repaid in the borrowed asset. Borrow rates vary with utilisation and, on Vena, with the borrower's reputation. ## Collateral and loan-to-value (LTV) Collateral is the portion of a supplied balance marked as backing a borrow. Each asset has a **max LTV**: the maximum fraction of its value that can be borrowed against. An asset with 70% max LTV lets a user supply $1,000 of that asset and borrow up to $700 of value at the point of borrow. Max LTV is the limit at borrow time; the threshold that triggers liquidation is set separately and is always above max LTV. ## Health factor The health factor is the single number to watch. It expresses how close a position is to liquidation: * **Above 1**: the position is safe. * **At 1**: the position is at the liquidation threshold. * **Below 1**: the position is eligible for liquidation. Health factor moves with prices. A collateral-asset price drop or a debt-asset price rise both reduce it. Accrued borrow interest also lowers it over time. ## Liquidation When the health factor falls below 1, the position becomes eligible for liquidation. A liquidator repays part of the debt and receives collateral in return, at a discount — shown in the dapp as the **liquidation penalty**. It's what compensates liquidators for closing risky positions quickly. Liquidation clears just enough debt to restore health; it does not wipe the entire position unless the position is very deep underwater. There is no grace period and no protocol-side discretion. The remedy for a falling health factor is to top up collateral or repay debt before the threshold is crossed. ## Rate curve Borrow rates respond to pool utilisation. Each market has a **rate curve** with a gentle slope up to a **kink** (the utilisation target) and a much steeper slope beyond it. Low utilisation means low rates, which encourages borrowing. Utilisation above the kink means rates climb sharply, which encourages repayment and discourages further borrowing until the pool returns to target. The curve is set per asset by the curator. ## Reputation adjustment Vena adds one input on top of the standard rate curve: reputation. Fluent tracks reputation via Prints, derived from on- and off-chain activity across multiple chains. Vena reads the borrower's Prints when a position is opened and adjusts the borrow rate accordingly. Strong reputation earns a better rate than the baseline; no reputation leaves the rate at the baseline. Reputation affects **rate only**. It does not change LTV, liquidation threshold, or caps. Those are set per asset by the curator and apply uniformly. See [Parameter reference](/asset-parameters/parameter-reference.md) for the Prints-to-rate-adjustment tiers per asset. At mainnet launch, borrow rates follow the standard utilisation curve. The Prints-based rate adjustment described above is Vena's product direction and activates after launch. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation by asking a question. Perform an HTTP GET request on the following URL with the `ask` and `goal` query parameters: ``` GET https://docs.vena.finance/welcome/core-concepts.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is what the user is ultimately trying to achieve, the reason they need the answer. Sharing it helps GitBook give you a better, more relevant answer. 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