Tank and Liquidations

What's the Tank?

The Tank maintains system solvency by acting as a source of liquidity for liquidated debt.

• When a Bottle is liquidated, the Tank burns BUCK to repay the debt, receiving the Bottle's collateral in return.

• Users can fund the Tank by transferring BUCK into it (as Tank Contributors).

Why deposit BUCK to the Tank?

Tank Contributors deposit $BUCK into the Tank Pool to participate in liquidations, acquiring collateral at advantageous rates.

How Liquidations Work

When a Bottle falls below the Minimum Collateral Ratio, the following liquidation process occurs:

• Anyone can trigger the liquidation and earn 0.5% of the Bottle’s collateral as the liquidator’s reward.

• The protocol collects 2% of the collateral as a liquidation fee.

• The Tank repays the Bottle’s debt using BUCK.

• The remaining collateral (after deducting the 2.5% total fee) is distributed to Tank contributors based on their deposit share.

This mechanism ensures:

• The protocol remains fully collateralized.

• Liquidators are incentivized to maintain system health.

• Tank contributors are rewarded for supporting liquidations.

Withdrawal Terms

• Deposits can be withdrawn at any time unless there are liquidatable Bottles below a 110% collateral ratio.

• When a bottle qualifies for liquidation but has not yet been liquidated, Tank will temporarily halt withdrawals (while still allowing deposits).

Risk of Loss

• Losses can occur if a Bottle gets liquidated below a 100% collateral ratio due to a flash crash or oracle failure.

• Losses are also possible if BUCK trades above $1 worth of SUI value.

Empty Tank Scenario

A liquidation bot, using Programmable Transaction Blocks (PTB), can execute the following strategy:

1. Flash mint BUCK

2. Deposit BUCK into the Tank

3. Trigger the liquidation

4. Receive underpriced collateral

5. Swap collateral back to BUCK on a DEX

6. Repay the flash loan or burn minted BUCK

To manage risk, the debt ceiling for each collateral type is set based on DEX liquidity, ensuring liquidation does not overwhelm markets with illiquid assets.