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To borrow on Dynamo, you first post collateral, assets you deposit into a market that serve as security for your Morpho loan. The protocol holds your collateral and releases it when you repay your debt. Because the blockchain is non-custodial, this process is governed entirely by smart contracts with no human intermediaries.

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Liquidation Loan-to-value (LLTV) ratio

The liquidation loan-to-value ratio defines how much you can borrow relative to the value of your collateral. Each asset has a maximum LLTV set by the market’s risk parameters.

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LLTV examples

More volatile assets carry lower LLTV ratios because their value can swing more quickly, increasing the risk of under-collateralization.
Max LLTV is the cap on what you can borrow when you open a position. Borrowing at or near the maximum immediately puts you at risk if collateral prices move. Most users borrow at 50–70% of maximum to maintain a safety buffer.

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Health factor

Your health factor is a single number that summarizes the safety of your position. It compares your collateral value (weighted by the liquidation threshold) to your outstanding debt.
If your health factor drops to 1.0 or below, your position can be liquidated. Monitor it regularly, especially when collateral prices are volatile.

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Increasing your borrowing power

If you want to borrow more or improve your health factor, you have two options:
1

Add more collateral

Deposit additional collateral into the market. This raises the collateral value side of the equation and improves your health factor immediately.
2

Repay part of your debt

Repay some of your outstanding crypto loans. This reduces the debt side and directly improves your health factor without requiring additional capital.
Keep your health factor above 1.5 as a rule of thumb. This gives you room to absorb a 25–30% drop in collateral value before liquidation risk becomes serious.