The Stability Pool

Any holder of jAssets can deposit them into the Stability Pool, designed to absorb debt from liquidations and reward depositors with the liquidated collateral, proportionate to their deposit size.

Given that liquidations occur at an ICR (Initial Collateralization Ratio) just below 110%—and typically above 100% even in extreme cases—depositors generally gain from liquidations. In such scenarios, the dollar value of the gained collateral exceeds the dollar value of the jAsset loss (assuming jAsset prices align with their oracles).

After one or more liquidations, a deposit remains as a compounded deposit—absorbing debt losses and receiving collateral gains.

Mixed Liquidations: Offset and Redistribution

When a Vault is liquidated into the Stability Pool:

• Offset: If the jAsset debt matches or exceeds the Stability Pool's holdings, the debt cancels out, and the corresponding jAssets are burned.

• Pure Offset: If the Stability Pool holds more jAssets than the Vault's debt, the entire debt cancels, and the Vault's collateral is shared among depositors.

In cases where the Stability Pool holds fewer jAssets than the Vault's debt, a fraction of the debt is offset using the Pool's jAssets, and a proportionate fraction of the Vault's collateral goes to Stability Providers. The remaining debt and collateral redistribute to active Vault—a mixed offset and redistribution.

Redistributions: Separated by Collateral

Redistributions occur per collateral token type:

• For instance, a Vault with 30% BTC and 70% USDT collateral redistributes 30% of its jAsset debts to other BTC Vault and 70% to USDT Vault.

If the last Vault of a collateral type is liquidated, its tokens are marked as unassigned in the Storage Pool. They can be claimed by any borrower using the claimUnassignedAssets function, transferring the collateral and jAsset debts to their Vault.

Reserve Pool

The Reserve Pool compensates Stability Pool providers if a Vault's collateral ratio drops below 100% due to rapid oracle price fluctuations. Funded by debt borrowing fees and governance token subsidies, its capacity dynamically adjusts based on the total supply of jUSD tokens issued.

The Reserve Pool aims to mitigate market volatility, safeguard Stability Pool providers, and bolster overall system confidence.