SafeBorrow – 2025
Exploring Risk Visualization in Crypto-based Loan
Overview
This project is a personal exercise to explore how risk visualization and user-friendly design can help users, especially those less knowledgeable about crypto, assess the risks of taking out crypto-backed loans.
01
Goal and Purpose
What and Why
What is the Challenge
Users, especially those new to crypto-backed loans, often struggle to understand the Loan-to-Value (LTV) ratio and its implications on their loan risk. LTV is a critical financial metric that compares the loan amount to the value of the collateral, but it’s not an intuitive concept for most users. Without clear communication, users may feel overwhelmed and hesitant to take action. Additionally, less knowledgeable users may inadvertently take on too much risk by selecting high LTV ratios, leading to unfavorable loan positions such as margin calls or liquidation.
Why is it Important to Solve?
Solving this challenge is crucial because:
-
User Empowerment and Confidence: New users need reassurance and clarity to feel confident in their decisions. By providing a clear and intuitive way to understand LTV and its associated risks, users can make informed decisions without feeling overwhelmed.
-
Reducing Hesitation and Increasing Adoption: Many potential users avoid crypto-backed loans because they perceive them as too risky or complex. By addressing this hesitation, we can encourage more users to explore and adopt these financial tools.
-
User Protection: Restricting high-risk actions prevents users from making costly mistakes, building trust and encouraging long-term engagement.
Learning Objectives
-
Understand how to design a tool that helps users assess loan risks without requiring deep financial knowledge.
-
Explore how volatility and liquidity of collateral assets influence risk management strategies.
High-level Goals
01
Provide less knowledgeable users with a clear and intuitive way to assess loan risks.
02
Restrict users from entering high-risk zones (Warning and Danger) to prevent unfavorable loan positions.
02
Challenges
Challenge 1: Communicating Risk Clearly
Users need to understand complex financial concepts like LTV ratios, Margin Calls, and liquidation risks. Without clear communication, users may feel overwhelmed and hesitant to take action.
Challenge 2: Tailoring Risk Management to Collateral Types
Different collateral assets (e.g., BTC, USDT, LTC) have varying levels of volatility and liquidity, requiring tailored risk management. Users may not understand how their choice of collateral affects their loan risk.
Challenge 3: Restricting High-Risk Actions
Less knowledgeable users may inadvertently take on too much risk, leading to unfavorable loan positions. Without safeguards, users could face significant financial losses.
03
My Thought Process
Back to Other Projects
How might we allow users to naturally select a good combination of collateral, credit and LTV?
Through exploring putting the information in a table, displaying error messages when users reach a dangerous threshold, or showing plainly in text about the Margin call LTV and Liquidation LTV.
I found them all a bit too passive or requiring users too much effort just to avoid making mistakes.
And I arrived at the following exploration with an assumption.
If I make risk more visible and actively restrict users from making unfavorable decision, I can empower user to make decisions more easily.
04
Solution
Visulized to Empower
To address the challenges, I explored the following features in the crypto loan screen interface that simplifies the process and provides clear, visual feedback. With the aim to empower users to make informed decisions without requiring extensive financial knowledge, reducing hesitation and building confidence in the platform.
-
+/- 10% LTV Buttons: Users can easily adjust their LTV ratio in increments of 10% (with the maximum set below the Margin Call LTV), ensuring they stay within safe limits.
-
Risk Bar Visualization: A color-coded Risk Bar visually communicates the user’s loan risk, showing whether their position is in the Green (Safe, below Margin Call LTV), Yellow (Warning, Above Margin Call LTV), or Red (Danger, Above Liquidation LTV) zones.
Taking out a crypto-backed loan
Taking out a crypto-backed loan involves three key decisions:
-
Selecting a Collateral: Choosing a cryptocurrency (e.g., BTC, ETH) and specifying the amount to use as collateral.
-
Choosing a Loan Amount: Deciding how much to borrow, typically in a stablecoin like USDT or USDC.
-
Setting the Loan-to-Value (LTV) Ratio: Determining the ratio of the loan amount to the collateral value.
Here’s how it works:
-
The user deposits a cryptocurrency as collateral (e.g., 1 BTC).
-
Based on the collateral’s value and the selected LTV ratio, the platform calculates the loan amount (e.g., $30,000 USDT at 50% LTV).
-
The LTV ratio is a critical metric that determines the risk level of the loan. A lower LTV ratio (e.g., 20%) means the loan is relatively safe because the collateral value would need to drop significantly before triggering a liquidation. Conversely, a higher LTV ratio (e.g., 70%) increases the risk of liquidation if the collateral’s value fluctuates.
However, understanding the relationship between LTV, collateral value, and loan risk is not intuitive for most users. Without clear guidance, users may:
-
Feel Overwhelmed: Complex financial concepts like LTV, margin calls, and liquidation thresholds can be confusing.
-
Make Costly Mistakes: Users might unknowingly enter high-risk positions, leading to unfavorable outcomes like liquidation.
-
Avoid Taking Loans: The perceived complexity and risk may deter users from exploring crypto-backed loans altogether.
+/- 10% LTV Buttons
Users can easily adjust their LTV ratio in increments of 10% (with the maximum set below the Margin Call LTV), ensuring they stay within safe limits.
Risk Bar Visualization
A color-coded Risk Bar visually communicates the user’s loan risk, showing whether their position is in the Green (Safe), Yellow (Warning), or Red (Danger) zones.
Asset-Specific LTV Ratios
Selecting different coins as collaterals change the display of the risk bar to allow users to easily assess whether the asset is a suitable collateral choice for him.
How They Work Together
When the user selects an LTV ratio using the LTV controls, the pointer on the Risk Bar updates its position to reflect the chosen ratio. This provides immediate visual feedback on the user’s loan risk, helping them understand how their decision impacts their overall risk level.
Changing the collateral coin triggers an update to the Risk Bar, which adjusts to visualize the different risk conditions associated with the selected coin. This dynamic update ensures users are always aware of how the volatility and liquidity of their chosen collateral affect their loan risk.
Since the maximum LTV value is set below the Margin Call threshold, users are restricted from entering high-risk zones. This design ensures users are always guided toward safe loan positions, significantly reducing the risk of margin calls or liquidation.
05
Reflection and Next Steps
Empowering Users Through Design
The goal of these features is not just to provide information but to empower users to take action. By abstracting away complexity, providing clear visual feedback, and guiding users toward safe decisions, the platform addresses the psychological barriers that cause hesitation. This approach fosters trust, builds confidence, and encourages users to explore and adopt crypto-backed loans, ultimately driving growth for the platform and creating value for users.
Key Takeaways
Hypothesis-Driven Design
The Risk Bar is a hypothesis that visual risk indicators can help users better understand and manage their loan risks. This hypothesis will need to be tested with real users to validate its effectiveness.
Business Value of Crypto Collateral
Through this design exploration, I found myself asking: What value does this tool truly provide to users, beyond simplifying the loan process? This question prompted me to delve deeper into the study, aiming to demonstrate the tangible benefits of taking out crypto-backed loans in future iterations.
It also led me to reflect on the broader potential of this functionality. Perhaps its success hinges on the real-world value users can gain by borrowing against their crypto assets. For instance, enabling users to borrow fiat currency (e.g., USD) against their crypto collateral could significantly enhance the tool’s utility and appeal, making it not just easier to use, but also more impactful in addressing users’ financial needs.
High Volatility Coins
It generally has lower Margin LTV and Liquidation LTV to account for high volatility.
Platform Coin
It generally has lower LTV ratios to account for platform-specific risks and low liquidity.
Low Volatility Coins
It generally has higher Margin LTV and Liquidation LTV due to stable prices.
Next Steps
1. Develop High-Fidelity Prototypes
Create detailed, interactive prototypes to bring the design to life. This will allow for more accurate testing and validation of the user experience.
2. Conduct User Testing
Gather feedback from target users, particularly those less familiar with crypto-backed loans. Focus on understanding how well the Risk Bar, LTV controls, and collateral selection meet their needs and expectations.
3. Refine Based on Feedback
Iterate on the design to address any usability issues or gaps identified during testing. This could include refining the visual hierarchy, improving the responsiveness of the LTV controls, or enhancing the clarity of the Risk Bar.
4. Explore Real-World Utility
Investigate how the tool can provide real-world value to users. For example, enabling users to borrow fiat currency (e.g., USD) against their crypto collateral could significantly increase the tool’s utility and appeal.
5. Expand Educational Resources
Add tooltips, FAQs, and tutorials to help users understand key concepts like LTV ratios, margin calls, and liquidation risks. This will further empower users to make informed decisions.
Go Home
Next Project