110%collateral ratios, it is expected that Stability Providers will receive a greater dollar-value of collateral relative to the debt they pay off.
110%will be closed (liquidated).
~10%value overall hence it is critical to always keep the ratio above
110%, ideally above
110%. The initiator receives a gas compensation (
0.5%of the Trove's collateral) as reward for this service.
gas compensation = 200 LUSD + 0.5% of Trove's collateral (ETH)
200 LUSDis funded by a Liquidation Reserve while the variable
0.5%part (in ETH) comes from the liquidated collateral, slightly reducing the liquidation gain for Stability Providers.
110%, you will most likely experience a net gain whenever a Trove is liquidated.
1,000,000 LUSDin the Stability Pool and your deposit is
200,000 LUSDand collateral of
400 ETHis liquidated at an Ether price of
$545, and thus at a collateral ratio of
109% (= 100% * (400 * 545) / 200,000). Given that your pool share is
10%, your deposit will go down by
10%of the liquidated debt (
20,000 LUSD), i.e. from
80,000 LUSD. In return, you will gain
10%of the liquidated collateral, i.e.
40 ETH, which is currently worth
$21,800. Your net gain from the liquidation is
110%that have not been liquidated yet.
100%most of the time, it is theoretically possible that a Trove gets liquidated below
100%in a flash crash or due to an oracle failure. In such a case, you may experience a loss since the collateral gain will be smaller than the reduction of your deposit.
$1, liquidations may become unprofitable for Stability Providers even at collateral ratios higher than
100%. However, this loss is hypothetical since LUSD is expected to return to the peg, so the “loss” only materializes if you had withdrawn your deposit and sold the LUSD at a price above