# FAQs ## Borrower Control and Restrictions **Q: Do Borrowers have full control over collateral once disbursed?** No. The Borrower set will be comprised of regulated financial institutions that enter into legal agreements with Underwriters to restrict permissible strategies. **Q. How does the protocol ensure there are no risky strategies?** Underwriters bear direct risk for their delegation choices. By underwriting specific Borrowers, Underwriters incentivize due diligence on strategy viability. **Q: Are there caps on collateral lent to Borrowers?** Yes. Delegation limits and nominal exposure thresholds prevent concentration risk. ## Loan Security **Q: Does the protocol impose minimum overcollateralization requirements on Underwriters?** Yes, the protocol checks the collateralization ratio before the Borrower can borrow. The overcollateralization ratio is different for every collateral asset and is set conservatively to prevent any unexpected liquidations. **Q: Which assets are accepted as Underwriter collateral?** Only blue-chip cryptocurrencies: ETH, wBTC, Liquid Staking Tokens (LSTs), and stablecoins. **Q: What happens if Underwriters withdraw their delegation mid-loan?** Underwriters and Borrowers should have a prior agreement when Underwriters intend to remove delegation for position unwinding. Unilateral withdrawals will trigger liquidation. Note that there is a built-in buffer period in Shared Security Networks to mitigate an accidental withdrawal. ## Shared Security Network **Q. How is Liquidation and Redistribution used in Cap?** Malicious or undercollateralized Borrowers are autonomously liquidated, where Underwriter delegations are redistributed back to the Lenders. **Q. How does Cap differ from other restaking protocols?** Cap replaces passive Proof-of-Stake rewards with productivity-based incentives: * Underwriters earn premiums tied to Borrower performance. * Borrowers retain surplus yield, fostering competitive strategy innovation. Cap takes an innovative approach of rewarding Underwriters on a Borrower basis, where counterparty risk is established one-to-one with the Borrower they are underwriting. This architecture allows Borrowers to take more agency and be rewarded for their productivity. For details, please check out our [Productivity Based Incentives](https://mirror.xyz/0x83c21bb4Bf0EC116f5a1945AaeF847Fe3b321B32/Xg7gCAqgmcxgXhuwaWXVJDSCEIMn3_dewNWAie2Tn_k) article. --- # 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.cap.app/overview/faqs.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.