11 times
, increasing their exposure to price changes. This is possible because LUSD can be borrowed against Ether, sold on the open market to purchase more Ether — rinse and repeat.* 110%
. A minimum debt of 2,000 LUSD
is required.0.5%
under normal operation. The fee is 0%
during Recovery Mode.
A 200 LUSD
Liquidation Reserve charge will be applied as well, but returned to you upon repayment of debt. baseRate
. The fee rate is confined to a range between 0.5%
and 5%
and is multiplied by the amount of liquidity drawn by the borrower.0.5%
and the borrower wants to receive 4,000 LUSD
to their wallet. Being charged a borrowing fee of 20.00 LUSD
, the borrower will incur a debt of4,220 LUSD
after the Liquidation Reserve and issuance fee are added. 110%
.$3,000
and you decide to deposit 10 ETH
. If you borrow 10,000 LUSD
, then the collateral ratio for your Trove would be 300%
.25,000 LUSD
that would put your ratio at 120%
. 110%
. So if your Trove has a debt 10,000 LUSD
, you would need at least $11,000
worth of Ether posted as collateral to avoid being liquidated.150%
(e.g. 200%
or better 250%
).9.09% (= 100% * 10 / 110)
of your collateral’s Dollar value.200 LUSD
is set aside as a way to compensate gas costs for the transaction sender in the event your Trove being liquidated. The Liquidation Reserve is fully refundable if your Trove is not liquidated, and is given back to you when you close your Trove by repaying your debt. The Liquidation Reserve counts as debt and is taken into account for the calculation of a Trove's collateral ratio, slightly increasing the actual collateral requirements.110%
). If at the time of redemption you have the Trove with the lowest ratio, you will give up some of your collateral, but your debt will be reduced accordingly. 2 ETH
collateralized and a debt of 3,200 LUSD
. The current price of ETH is $2,000
. This puts your collateral ratio (CR) at 125% (= 100% * (2 * 2,000) / 3,200)
. Let’s imagine this is the lowest CR in the Liquity system and look at two examples of a partial redemption and a full redemption:1,200 LUSD
for 0.6 ETH
and thus repays 1,200 LUSD
of your debt, reducing it from 3,200 LUSD
to 2,000 LUSD
. In return, 0.6 ETH,
worth $1,200
, is transferred from your Trove to the redeemer. Your collateral goes down from 2 to 1.4 ETH
, while your collateral ratio goes up from 125%
to 140% (= 100% * (1.4 * 2,000) / 2,000)
.6,000 LUSD
for 3 ETH
. Given that the redeemed amount is larger than your debt minus 200 LUSD
(set aside as a Liquidation Reserve), your debt of 3,200 LUSD
is entirely cleared and your collateral gets reduced by $3,000
of ETH, leaving you with a collateral of0.5 ETH (= 2 - 3,000 / 2,000)
.1 LUSD = $1
), the maximum achievable leverage ratio is 11x
. It is given by the formula: