Actively Managing Idle Capital
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Idle capital is the amount of your collateral that is not actively used to secure a loan, typically this amount is used to shield the loan from price fluctuations in the value of users’ collateral.
For example if a user is using ETH as collateral and is borrowing USDC they can typically borrow around 80% of their collateral value in USDC. However as the value of ETH will fluctuate the user will not want to borrow close to the maximum amount, so may borrow 30% of their collateral value instead. The difference between your theoretical maximum loan (80% Loan-To-Value) and your actual loan (30% Loan-To-Value) we call Idle Capital.
Altitude automatically activates part of this idle capital to generate yield on behalf of its users. Yield earned is automatically used to repay part of users’ debt.
If the value of a user's collateral goes up and the user doesn't add or remove collateral, the loan-to-value for the user will decrease (just like other lending protocols). Altitude will then borrow more, so that there's more capital at work.
If the value of a user's collateral goes down and the user doesn't add or remove collateral, the loan-to-value for the user will increase (just like other lending protocols). Altitude will then borrow less, to reduce the overall loan-to-value to the vault's preset.
