Recovery Mode
During Recovery Mode, Bottles with a collateral ratio below 150% can be liquidated.
Moreover, the system blocks borrower transactions that would further decrease the TCR. New BUCK may only be issued by adjusting existing Bottles in a way that improves their collateral ratio, or by opening a new Bottle with a collateral ratio
>=150%
. In general, if an existing Bottle's adjustment reduces its collateral ratio, the transaction is only executed if the resulting TCR is above 150%
. The Total Collateral Ratio or TCR is the ratio of the Dollar value of the entire system collateral at the current ETH:USD price, to the entire system debt. In other words, it's the sum of the collateral of all Bottles expressed in USD, divided by the debt of all Bottles expressed in BUCK.
The goal of Recovery Mode is to incentivize borrowers to behave in ways that promptly raise the TCR back above 150%, and to incentivize BUCK holders to replenish the Tank.
Economically, Recovery Mode is designed to encourage collateral top-ups and debt repayments, and it also acts as a self-negating deterrent: the possibility of it occurring actually guides the system away from ever reaching it. Recovery Mode is not a desirable state for the system.
While Recovery Mode has no impact on the redemption fee, the borrowing fee is set to
0%
to maximally encourage borrowing.By increasing your collateral ratio to
150%
or greater, your Bottle will be protected from liquidation. This can be done by adding collateral, repaying debt, or both.Yes, you can be liquidated below
150%
if your Bottle's collateral ratio is smaller than 150%. In order to avoid liquidation in Normal Mode and Recovery Mode, a user should keep their collateral ratio above 150%
. - ICR = Individual Collateral Ratio
- MCR = Minimum Collateral Ratio
- TCR = Total Collateral Ratio
Condition | Liquidation Behavior |
ICR <=100% | Redistribute all debt and collateral to Bottles. |
100% < ICR < MCR & Tank BUCK > Bottle debt | BUCK in the Tank equal to the Bottle's debt is offset with the Bottle's debt. The Bottle's collateral is shared between depositors. |
100% < ICR < MCR & Tank BUCK < Bottle debt | The total Tank BUCK is offset with an equal amount of debt from the Bottle. A fraction of the Bottle's collateral (equal to the ratio of its offset debt to its entire debt) is shared between depositors. The remaining debt and collateral are redistributed to Bottles. |
MCR <= ICR < TCR & Tank BUCK >= Bottle debt | The Tank BUCK is offset with an equal amount of debt from the Bottle. A fraction of collateral with a dollar value equal to 1.1 * debt is shared between depositors. Nothing is redistributed to other Bottles. |
MCR <= ICR < TCR & Tank BUCK < Bottle debt | Do nothing. |
ICR >= TCR | Do nothing. |
In Recovery Mode, liquidation loss is capped at
110%
of a Bottle's collateral. Any remainder, i.e. the collateral above 110%
(and below the TCR), can be reclaimed by the liquidated borrower using the standard web interface.This means that a borrower will face the same liquidation “penalty” (
10%
) in Recovery Mode as in Normal Mode if their Bottle gets liquidated.Last modified 5mo ago