# Collateralization Model The value of an LP token is always backed 50-50 by the underlying tokens in the token pair. In order to determine how much collateral is necessary for borrowing and ensure borrowers can’t borrow more than the value of their collateral, the Tarot Protocol needs to reliably calculate the value of LP tokens. The collateralization model in Tarot determines the collateral needed for a loan, given the safety margin and liquidation incentive parameters for the lending pool. These safety margin and liquidation incentive parameters work to ensure that even after a volatile price swing in the underlying tokens, there will always be enough collateral to both repay the loan and pay a liquidator in the event of liquidation. More information on the collateralization model can be found on Medium: * [Tarot Deep Dive: Part One](https://tarotfinance.medium.com/tarot-deep-dive-part-one-61ea3d8c4d2) * [Tarot Deep Dive: Part Two](https://tarotfinance.medium.com/tarot-deep-dive-part-two-dc2fae74aa3f) --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.tarot.to/tarot-protocol/collateralization-model.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.