# Collateral Assets

MAI is backed by crypto token collateral. These collaterals are onboarded through community votes - a full breakdown of this process can be found [here](broken://pages/GU1h2JVnAKhMM7rne2kk). 

Below are the metrics that QiDao's community monitors after adding collaterals to the system. Risk parameters are adjusted based on the evolving metrics of tokens. Collateral tokens that exhibit deteriorating metrics are delisted from the protocol.

1. **Onchain Liquidity:** available decentralized exchange liquidity on the each chain that the asset is listed on. This metric is tracked to ensure that there is enough liquidity for debt positions to be liquidated at any point.
2. **Centralization of liquidity pools:** the centralization of liquidity providers for the token's onchain liquidity. This is important as centralized liquidity pools are more likely to experience significant changes in liquidity provided. The minimum standard requires no single liquidity provider to hold more than 20% of the token's onchain liquidity.
3. **Onchain slippage:** the lost that can be expected from selling collateral assets in the open market due to trade slippage. Slippage for collateral assets must always be below the bonus given to liquidators. This is done to ensure liquidations remain attractive for liquidators.
4. **Share of overall collateral:** the total amount of one collateral locked in the protocol over the total amount of collateral in the system. MAI should not be overexposed to any one token. The strategy in adding several collaterals is one of diversification.
5. **Risk grading:** grade given to collaterals based on Aave's grading system. Updates have been made to focus more on market risk. This grade tracts volatility, market cap, trading volume, smart contract age, smart contract permissions, number of onchain holders, and number of transactions executed.


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