> ## Documentation Index
> Fetch the complete documentation index at: https://docs.edel.finance/llms.txt
> Use this file to discover all available pages before exploring further.

# Protocol Basics

<Frame>
  <img src="https://mintcdn.com/edelfinance/RAmQMxLSnNZx1q3j/images/Protocol%20Basics.jpg?fit=max&auto=format&n=RAmQMxLSnNZx1q3j&q=85&s=d1380619e9d87e59e6d7d76972380511" alt="Protocol basics diagram illustrating core architecture and concepts" width="1920" height="1080" data-path="images/Protocol Basics.jpg" />
</Frame>

Understanding Edel Finance's core architecture and concepts is essential before diving into supplying and borrowing. This guide covers the foundational elements that power the protocol.

## Protocol Architecture

Edel Finance operates through interconnected smart contracts that manage liquidity pools, interest rates, and risk parameters across supported assets:

## Core Components

<AccordionGroup>
  <Accordion title="Liquidity Pools" icon="chart-spline">
    * Individual pools for each supported asset (USDC, TESLAON, APPLON, etc.)
    * Suppliers provide funds, borrowers access liquidity
    * Each pool maintains its own reserves and utilization rates
  </Accordion>

  <Accordion title="Dynamic Interest Rate Models" icon="arrow-trend-up">
    * Rates adjust automatically based on supply and demand
    * Higher utilization = higher interest rates
    * Incentivizes balance between supply and borrowing
  </Accordion>

  <Accordion title="Risk Management Systems" icon="shield-check">
    * Health Factor calculations for borrowing positions
    * Liquidation mechanisms to protect protocol solvency
    * Loan-to-Value (LTV) ratios for each asset
  </Accordion>

  <Accordion title="Oracle Integration" icon="link">
    * Real-time asset pricing from Chainlink & native Ondo oracles
    * Accurate collateral valuation for borrowing calculations
    * Price feeds update to reflect market conditions
  </Accordion>
</AccordionGroup>

## How Lending Works

### For Suppliers

1. **Deposit Assets**: Supply crypto assets to liquidity pools
2. **Receive aTokens**: Get interest-bearing tokens that represent your deposit
3. **Earn Interest**: aTokens automatically accumulate value over time
4. **Withdraw Anytime**: Redeem aTokens for your original asset plus earned interest

<Info>
  aTokens (like aUSDC, aTESLAON) are ERC-20 tokens that grow in value as interest accrues. They can be transferred or used in other DeFi protocols.
</Info>

### For Borrowers

1. **Provide Collateral**: Deposit assets as collateral (over-collateralized)
2. **Borrow Assets**: Take loans up to your borrowing capacity
3. **Maintain Health**: Keep your Health Factor above 1.0 to avoid liquidation
4. **Repay Loans**: Pay back borrowed amount plus accrued interest

<Warning>
  All loans are over-collateralized, meaning you must deposit more value than you borrow. This protects the protocol and suppliers from default risk.
</Warning>

## Getting Started

Now that you understand the basics, you're ready to:

<CardGroup cols={2}>
  <Card title="Start Supplying" icon="piggy-bank" href="/the-protocol/supply&earn">
    Learn how to deposit assets and earn yield through aTokens
  </Card>

  <Card title="Learn Borrowing" icon="coins" href="/the-protocol/borrow">
    Understand how to access liquidity using your crypto as collateral
  </Card>

  <Card title="Risk Management" icon="shield" href="/concepts/liquidation">
    Deep dive into Health Factor, liquidations, and position safety
  </Card>

  <Card title="Advanced Features" icon="zap" href="/concepts/e-mode">
    Explore isolation-mode and portfolio optimization strategies
  </Card>
</CardGroup>

<Tip>
  Take time to understand these concepts before borrowing. Start with small amounts to familiarize yourself with the interface and mechanics.
</Tip>