Liquidation Ratio

This is the ratio of asset value to stablecoin that is required to maintain for every open debt and equity position. Each specific asset will have it's own liquidation ratio as they all have different risk profile.

Liquidation Penalties

When a liquidation event occurs, penalties will be assessed and will be added on to the amount of stablecoin to be raised during auction.
Currently, liquidation penalty for debt position is set at 17% and equity position is set at 5%

Liquidation Process

First the vault is assessed to see if the asset locked is below the minimum liquidation ratio. If true, liquidator will do the following:
  • Calculate the amount of funds to raise based on the position and penalties
  • Transfer the vault's locked asset to the auctioneer
  • Transfer the vault's debt to the reserve pool
  • Start an auction and set reserve pool as the beneficiary for the proceeds

Liquidation of an Equity Position

For an equity position, liquidation is process is as follow:
  • Make sure treasury has enough funds for the equity position to be closed
  • Calculate how much asset to seize based on position and penalties
  • Transfer the calculated amount of asset to auctioneer
  • Clear the equity position, reduce the treasury stablecoin of the same amount
  • Start the auction, since there is no debt to clear, the auction will sell all available asset
Last modified 3mo ago