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description: LENX Lend Concepts
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# Concepts

**Market Pairs**

Each market pair operates as an isolated market allowing the borrowing of a specific ERC-20 token (referred to as the Asset Token) by offering another ERC-20 token as collateral (referred to as the Collateral Token).

Lenders that contribute Asset Tokens to a pair receive lxTokens. These lxTokens, which are also ERC-20 tokens, can be exchanged for Asset Tokens, known also as the underlying asset. As interest accumulates, the redeemable amount of the underlying asset for fTokens increases.

Borrowers can deposit Collateral Tokens into the pair to gain access to Asset Tokens.

**Loan-To-Value (LTV) Ratio**

The LTV ratio for each borrower indicates the relationship between the borrowed asset's value and the collateral's value. This ratio fluctuates with changes in the exchange rates between the Asset and Collateral Tokens or as interest accumulates.

If the LTV exceeds the set maximum limit, the borrower's position is deemed risky. Borrowers can either add more collateral or pay off some of their debt to bring their LTV back to a safe range.

The maximum LTV is fixed at setup, usually at 75%. However, custom setups can manually adjust this, allowing for potentially under-collateralized loans if set above 100%. For safety, any maximum LTV over 100% requires a borrower whitelist. The maxLTV() function on the pair reveals this set value.

**Interest Rate Calculators**

LENX Lend pairs use designated Rate Calculator contracts to set interest rates. There are three main types:

1. **Time-Weighted Variable Rate Calculator** adjusts interest rates based on borrowing volume, known as utilization. Rates decrease when below a target and increase when above it.
2. **Linear Rate Calculator** sets interest rates directly based on utilization levels. Lower utilization means lower rates, and higher utilization means higher rates.
3. **Variable Rate** determines rates based on utilization, with immediate adjustments to rate changes based on a predefined function. This calculator also modifies the rate curve based on sustained periods of low or high utilization.

**Liquidations**

Should a borrower's LTV exceed the maximum limit, any participant can cover part or all of the borrower's debt in exchange for collateral plus a liquidation bonus. This fee is fixed upon creation, defaulting to 10%, and is retrievable via the liquidationFee() function on the pair.

**lxToken Share Price**

Upon depositing Asset Tokens, lenders receive lxTokens at the prevailing lxToken Share Price, indicating their portion of the pool's underlying assets and accumulated interest. The Share Price rises with interest accrual, allowing lxTokens to be redeemed for an increasing quantity of Asset Tokens. The current lxToken Share Price is obtainable by querying the totalAsset() function and calculating the amount per share ratio.

**Vault Account Fundamentals**

The Vault Account is a critical element in pair accounting, composed of:

1. **Total Amount of Tokens:** Reflects the vault's market cap.
2. **Total Number of Shares:** Analogous to outstanding shares, indicating claims on the vault.

Shares are exchangeable for Asset Tokens at a rate (Share Price) determined by dividing the Total Amount by the Total Number of Shares. This rate effectively serves as the exchange rate between Shares and the underlying Asset Token.

Conversions are straightforward: divide the Amount by the Share Price to derive Shares, or multiply Shares by the Share Price to revert to the Amount.
