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 150%
.110%
. The initiator receives a gas compensation (200 LUSD
+ 0.5%
of the Trove's collateral) as reward for this service.gas compensation = 200 LUSD + 0.5% of Trove's collateral (ETH)
200 LUSD
is 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 LUSD
in the Stability Pool and your deposit is 100,000 LUSD
. 200,000 LUSD
and collateral of 400 ETH
is 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 100,000
to 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 $1,800
. 110%
that have not been liquidated yet.4 hours
>50%
.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this loss is hypothetical since LUSD is expected to return to the peg, so the “loss” only materializes if you had withdrawn your deposit and sold the LUSD at a price above $1
.