Actively Managing Dormant Capital

Dormant 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 Dormant Capital.

Altitude automatically activates part of this Dormant Capital to generate yield on behalf of its users. Yield earned is automatically used to repay part of users’ debt.