Recovery Mode
Recovery Mode kicks in when the Total Collateral Ratio (TCR) of the system falls below
150%.During Recovery Mode, Troves with a collateral ratio below the TCR (i.e. in the worst case up to
150%) can be liquidated. Moreover, the system blocks borrower transactions that would further decrease the TCR. New XIM may only be issued by adjusting existing Troves in a way that improves their collateral ratio, or by opening a new Trove with a collateral ratio
>=150%. In general, if an existing Trove's adjustment reduces its collateral ratio, the transaction is only executed if the resulting TCR is above 150%. The Total Collateral Ratio or TCR is the ratio of the Dollar value of the entire system collateral at the current WETH:USD price, to the entire system debt. In other words, it's the sum of the collateral of all Troves expressed in USD, divided by the debt of all Troves expressed in XIM.
The goal of Recovery Mode is to incentivize borrowers to behave in ways that promptly raise the TCR back above 150%, and to incentivize XIM holders to replenish the Stability Pool.
Economically, Recovery Mode is designed to encourage collateral top-ups and debt repayments, and also itself acts as a self-negating deterrent: the possibility of it occurring actually guides the system away from ever reaching it. Recovery Mode is not a desirable state for the system.
While Recovery Mode has no impact on the redemption fee, the borrowing fee is set to
0% to maximally encourage borrowing (within the limits described above).By increasing your collateral ratio to
150% or greater, your Trove will be protected from liquidation. This can be done by adding collateral, repaying debt, or both.Yes, you can be liquidated below
150% if your Trove's collateral ratio is smaller than the TCR. In order to avoid liquidation in Normal Mode and Recovery Mode, a user should keep their collateral ratio above 150%. - ICR = Individual Collateral Ratio
- MCR = Minimum Collateral Ratio
- TCR = Total Collateral Ratio
- SP = Stability Pool
Condition | Liquidation Behavior |
ICR <=100% | Redistribute all debt and collateral (minus $WETH gas compensation) to active Troves. |
100% < ICR < MCR & SP xUSD > Trove debt | XIM the Stability Pool equal to the Trove's debt is offset with the Trove's debt. The Trove's $WETH collateral (minus $WETH gas compensation) is shared between depositors. |
100% < ICR < MCR & SP xUSD < Trove debt | The total Stability Pool XIM is offset with an equal amount of debt from the Trove. A fraction of the Trove's collateral (equal to the ratio of its offset debt to its entire debt) is shared between depositors. The remaining debt and collateral (minus $WETH gas compensation) is redistributed to active Troves. |
MCR <= ICR < TCR & SP xUSD >= Trove debt | The Stability Pool XIM is offset with an equal amount of debt from the Trove. A fraction of $WETH collateral with dollar value equal to 1.1 * debt is shared between depositors. Nothing is redistributed to other active Troves. Since its ICR was > 1.1, the Trove has a collateral remainder, which is sent to the CollSurplusPool and is claimable by the borrower. The Trove is closed. |
MCR <= ICR < TCR & SP xUSD < Trove debt | Do nothing. |
ICR >= TCR | Do nothing. |
In Recovery Mode, liquidation loss is capped at
110% of a Trove's collateral. Any remainder, i.e. the collateral above 110% (and below the TCR), can be reclaimed by the liquidated borrower using the standard web interface.This means that a borrower will face the same liquidation “penalty” (
10%) in Recovery Mode as in Normal Mode if their Trove gets liquidated.