# Protocol Parameters

### Collateral Factor

Each asset on Hover has a Collateral Factor, which dictates how much a user can borrow based on the value of their deposit.

e.g. a 72% Collateral Factor means you can borrow up to 72% of the value of your deposit.

### Reserve Factor

The Reserve Factor determines the proportion of interest allocated into an asset's Reserve Pool. The Reserve Pool acts as a safeguard, protecting lenders from borrower default and liquidation issues.

e.g. a 10% Reserve Factor means that 10% of the interest paid by the borrowers of a given asset would be routed to the Reserve Pool.

### Borrow Cap

The Borrow Cap is the maximum amount of a given asset that can be borrowed at a time. 

e.g. a 2,000,000 Borrow Cap on KAVA means that is the limit for how much KAVA that can be withdrawn at once and in total by all borrowers on Hover. 

### Close Factor

The Close Factor is the maximum percentage of a borrower’s loan value that can be repaid in one transaction in the event of a liquidation.

e.g. a 50% Close Factor means that if a borrower has an outstanding debt worth $10,000, up to $5,000-worth of their collateral can be liquidated when their health factor drops below 1.

### Interest Rate Model

Hover uses the Jump Rate Interest Model, meaning that our interest rates are adjusted based on asset utilization.\
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If there is high asset utilization, it indicates a greater demand and usage of the asset within Hover. If that is the case (at a utilization rate of 80%), there will be a significant jump in interest rates to greater incentivize asset deposits and loan repayments.