Supplying and Borrowing

Helix is a decentralized, non-custodial liquidity protocol that allows users to supply and borrow cryptoassets directly on the Base network. The protocol operates permissionlessly and is designed to efficiently match capital between depositors and borrowers through overcollateralized lending markets managed entirely by smart contracts.

Users can supply supported tokens to Helix at any time. Once supplied, the protocol mints hTokens, which are yield-bearing representations of the underlying assets. These hTokens accrue interest continuously and can be redeemed 1:1 for the underlying tokens, assuming sufficient liquidity in the pool.

Suppliers earn interest based on the utilization rate of each asset. As more of an asset is borrowed, its interest rate increases, which incentivizes additional supply and ensures adequate liquidity for withdrawals. Supplied assets can optionally be enabled as collateral to support borrowing activity.

Withdrawals of supplied assets are allowed at any time, provided the reserve has enough unborrowed liquidity and the user’s health factor remains above the liquidation threshold (if borrowing against the same supplied collateral). Withdrawing from a position used as collateral lowers the user’s health factor and may increase the risk of liquidation.

Borrowing Assets

Borrowers can access liquidity by using their supplied assets as collateral. All borrowing is overcollateralized, meaning the value of the collateral must exceed the value of the borrowed assets. Each supported token has governance-defined parameters such as:

Loan-to-Value Maximum borrow capacity relative to the collateral’s value.	Liquidation Threshold The health factor point at which a loan becomes eligible for liquidation.	Liquidation Bonus A discount received by liquidators who repay undercollateralized debt.

Borrowers may open positions at variable interest rates, which dynamically adjust based on the supply and demand of the borrowed asset. Borrowed amounts are tracked using VariableDebtTokens, which accrue interest over time and represent the outstanding borrow balance.

Helix also supports repayment using hTokens or directly using the underlying asset. Advanced integrations may allow repaying with other tokens through periphery contracts, simplifying position management and closing.

Health Factor and Risk Management

The Health Factor(hf) is a critical risk metric in Helix. It determines the safety of a borrow position and is calculated as:

$$hf = (Collateral Value * LiquidationThreshold) / BorrowedValue$$

^{HF > 1 = Safe; the position is overcollateralized. | HF < 1 = Risky; eligible for liquidation.}

Health factors fluctuate as market prices change or as interest accrues. Users are responsible for maintaining a healthy ratio by either repaying debt or supplying more collateral. Lower health factors may be tolerable for stable or correlated assets, but for volatile tokens, a higher HF is recommended to reduce liquidation risk.

Liquidations

If a user’s health factor falls below 1, their position becomes eligible for liquidation:

• A liquidator repays up to 50% of the user’s debt.

• The liquidator receives the equivalent value of the user’s collateral, plus a liquidation bonus.

• The position’s health factor is recalculated post-liquidation.

Liquidations are permissionless and can be executed by any participant with technical capability. This open structure incentivizes rapid liquidation of risky positions, helping maintain protocol solvency.

Advanced Borrowing Modes

Helix includes features designed to optimize capital efficiency and reduce systemic risk:

• High-leverage stablecoin strategies.

• Yield farming with ETH staking derivatives.

• Improved capital efficiency for low-volatility assets.

Efficiency Mode (E-Mode)

E-Mode allows users to borrow assets that are highly correlated in price to their supplied collateral (e.g., stablecoins or ETH derivatives) with significantly higher LTV ratios. E-Mode is opt-in and only affects assets within the selected correlation category. This enables:

Isolation Mode

New or higher-risk assets can be listed as isolated collateral, restricting the borrower to only use that asset as collateral. In isolation mode:

• The borrower can only borrow governance-approved stablecoins.

• A debt ceiling caps borrowing for the isolated asset.

• Other collateral types cannot be used simultaneously.

Flash Loans

Helix supports flash loans, which allow users to borrow any available liquidity from the protocol for the duration of a single transaction without posting collateral. The borrowed amount and a small fee must be returned within the same transaction; otherwise, the transaction reverts. Flash loans enable advanced use cases such as:

• Interest Rate Models

• Collateral Swaps

• Debt Refinancing

• Self-liquidations

These operations are designed primarily for developers or integrators and require building custom smart contracts that interface with Helix’s Pool contract. Flash loans are subject to access control and protocol-defined fees.