Gas compensation

In the jAsset protocol, maximizing liquidation throughput is crucial to promptly handle undercollateralized Vaults. Liquidators, who may also hold Stability Pool deposits, play a pivotal role by profiting from these liquidations.

However, substantial gas costs pose a challenge. High gas costs for public liquidation functions may deter liquidators, resulting in prolonged undercollateralized Vault states.

To incentivize timely liquidations, the protocol directly compensates liquidators for their gas costs, ensuring they can break even or profit even during periods of high gas prices. Gas compensation consists of both jUSD and collateral:

• Collateral: Taken from the liquidated Vault.

• jUSD: Provided from a Liquidation Reserve funded when a borrower first issues debt. Each liquidation transaction draws from this reserve to compensate the liquidator. If multiple Vaults are liquidated in a single transaction, contributions from each Vault accumulate towards the total compensation.

Gas compensation per liquidated Vault follows this formula: 5 jUSD + 0.5% of the Vault's collateral.

Gas Compensation Schedule

• Opening a Vault: A borrower issues an additional 5 jUSD debt to a dedicated contract, the "gas pool," for gas compensation.

• Closing an Active Vault: Upon Vault closure, 5 jUSD is burned from the gas pool, and the corresponding debt on the Vault is canceled, refunding the gas compensation.

Gas Compensation and Redemptions

• Redemptions: When a Vault is redeemed, it's against the debt minus the initial 5 jUSD. This ensures that the gas compensation remains intact for liquidators.