Liquidation Logic
Last updated
Last updated
The precise behavior of liquidations depends on the initial collateralization ratio (ICR) of the Trove being liquidated and global system conditions: the total collateralization ratio (TCR) of the system, the size of the Stability Pool, etc.
ICR > TCR | Not liquidatable. |
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Stability Pool depositors gain collateral tokens over time as liquidated debt is canceled with their deposit. When they withdraw all or part of their deposited jAssets or top up their deposit, the system sends them their accumulated collateral gains.
Similarly, a Trove's accumulated gains from liquidations are automatically applied to the Trove when the owner performs any operation - e.g., adding/withdrawing collateral or issuing/repaying jAssets.
ICR < IMCR
Try to offset through the stability pools and redistribute anything remaining.
ICR ≥ IMCR
Normal Mode: Not liquidatable. Recovery Mode: Try to offset through the stability pools and redistribute anything remaining, but only a fraction (IMCR * debt's USD value) of the Trove's collateral, the rest will be transferred into the CollSurplusPool, from where it is claimable by the Trove owner.