High Efficiency Mode (E-Mode)

The High Efficiency Mode or "E-Mode" allows borrowers to extract the highest borrowing power out of their own collateral when they are borrowing assets that are correlated in price to their collateral.

This can happen when they the two assets are derivatives of the same underlying (eg. stablecoins pegged to USD).

In such cases, using E-Mode maximizes the capital efficiency of the borrower by allowing a higher value loan to be taken out.

How It Works

Price-correlated assets (e.g. DAI, USDC, and USDT) are categorized in the same E-Mode category.

Users can enable E-Mode to give them a higher Loan-to-Value (LTV) and Liquidation Threshold as long as they restrict their borrowing to that specific category of assets.

When a user supplies assets of the same category as his collateral, the borrowing power (LTV) and maintenance margin (Liquidation Threshold) are overridden by the E-Mode category configuration to allow for higher capital efficiency.

That is, the following parameters for collateral assets in the same category will be modified:

• Loan to Value (LTV)

• Liquidation Threshold

• Liquidation Discount

By default, E-Mode is not enabled, and users must activate it.

Example

Let us assume Carbon defines an E-Mode: Category 1 - (Stablecoins) as follows:

• LTV: 97%

• Liquidation Threshold: 98%

• Liquidation Bonus: 2%

• Assets: USDC, USDT

Bob chooses to enter this E-Mode and supplies USDC (which normally has 85% LTV).

Bob can borrow assets in Category 1 with the borrowing power defined by the E-Mode category (97%). By using E-Mode, Bob's capital is 12% more efficient.

Bob can still supply other non-Category 1 assets as collateral, but only assets that belong to the same E-Mode category will enjoy the improved parameters.

Activating E-Mode

Before enabling E-Mode categories, you need to return any borrowed assets that are not available in the respective E-Mode category. This ensures compliance with the selected category.

To activate E-Mode:

1. Tap the 'Disabled' option, which will prompt a pop-up to appear.

2. Select the desired E-Mode category. For example, selecting 'Stablecoins' limits borrowing to only stablecoins.

3. Under the selected E-Mode category, you can view the list of assets available for borrowing. For instance, under the 'Stablecoins' E-Mode category, users can borrow USD, USDC, and BUSD.

4. The increase in your LTV will also be reflected.

When disabling E-Mode, your LTV will decrease to the original value. That means that if your Health Factor is close to 1, you may need to first return the extra borrowed assets or top up your collateral

Switch E-Mode Category

To switch E-Mode categories, it is necessary to return any borrowed assets that are not available in the current E-Mode category. This ensures compliance with the asset requirements of the selected E-Mode category.

To switch to a different E-Mode category

1. Click on the E-Mode labeled button.

2. Select the desired E-Mode category from the available options.

3. The available assets for borrowing and associated maximum LTV will be adjusted according to the new category.

4. Confirm your selection by clicking 'Switch'.