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.

What are Liquidations?

• Liquidations ensure the stablecoin supply remains fully backed by collateral.

• If a Bottle falls under the minimum collateral ratio, it gets liquidated.

• 2% of the Bottle’s collateral is collected as a liquidation fee for the protocol.

• The Tank absorbs the Bottle’s debt, and its collateral, after deducting the liquidation fee, is distributed among Tank contributors.

Who can liquidate Bottles?

• Anyone can liquidate a Bottle when it drops below MCR.

• The initiator earns 0.5% of the Bottle's collateral as a reward.

How do Tank Contributors benefit from Liquidations?

• Tank Contributors gain a net profit from liquidations as these happen below minimum collateral ratio.

• Contributors receive a portion of the liquidated collateral proportional to their share in the Tank.

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• Deposits can be withdrawn at any time unless there are liquidatable Bottles below a 110% collateral ratio.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

• Liquidation bot written by developers can do this strategy through PTB(programmable transaction block) 1. Flash loan/mint BUCK 2. Deposit BUCK in tank 3. Trigger liquidation function 4. Receive cheaper collateral 5. Swap collateral to BUCK on DEX 6. Repay flash loan/mint The risk for this strategy is that the DEX liquidity for collateral, so we set the debt ceiling for each collateral depending on their liquidity on DEX.