Isolation Mode

How isolated collateral and debt ceilings are used to manage risk in Superlend Markets.

Isolation Mode is a risk management feature used in Superlend Markets to support new or higher-risk collateral assets.

When an asset is listed in Isolation Mode, it can be supplied as collateral under stricter borrowing constraints to limit potential system-wide risk.

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How Isolation Mode Works

• Isolated assets have a debt ceiling, which caps the total amount that can be borrowed against that asset across the market.

• When using an isolated asset as collateral, users can only borrow approved stablecoins.

• Borrowing limits are enforced automatically at the smart contract level.

Isolation Mode allows Superlend to safely introduce new asset types without exposing the entire market to excessive risk.

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Borrowing Restrictions

While an isolated asset is enabled as collateral:

• Only configured stablecoins can be borrowed

• Other volatile assets cannot be borrowed

• The debt ceiling applies at the market level, not per user

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Entering and Exiting Isolation Mode

Isolation Mode does not require manual activation.

• You enter Isolation Mode automatically when you supply an asset that is listed as isolated collateral.

• You exit Isolation Mode once the isolated asset is no longer used as collateral.

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Why Isolation Mode Exists

Isolation Mode helps:

• Reduce contagion risk from new or less-proven assets

• Protect market liquidity and solvency

• Enable gradual onboarding of real-world assets and other novel collateral types