# Collateralization Model An LP token's value is always supported equally by each of the underlying tokens in the token pair. The Lif3 Protocol needs to accurately assess the value of LP tokens to establish the amount of collateral required for borrowing and guarantee that borrowers cannot borrow more money than the value of their collateral. The safety margin and liquidation incentive parameters for the lending pool are inputs into the Lif3 collateralization model, which calculates the collateral required for a loan. This safety margin and liquidation incentive criteria make sure that there will always be enough collateral to pay back the loan and pay a liquidator in the event of liquidation, regardless of how much the price of the underlying tokens fluctuates. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.lif3.com/terrace/collateralization-model.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.