Stablecoin Borrowing

In-depth overview on borrowing with yield-bearing stables

Liquidation Risk

Pure yield-bearing stablecoin borrowing come with low liquidation risk because the dollar value of this collateral shouldn't drop. Low collateral ratio stablecoin strategies have lesser liquidation risk both in Normal Mode and Recovery Mode.

In both Normal and Recovery Mode, you will be eligible for liquidation if your trove's collateral ratio is below 110%. But in Recovery Mode you are also eligible for liquidation if your AICR (Adjusted Individual Collateral Ratio) is less than the TCR.

Trove Status	Normal Mode	Recovery Mode
ICR < 110%	Liquidation	Liquidation
110% < ICR and AICR < TCR	Can't be liquidated	Liquidation
110% < ICR and 150% < AICR	Can't be liquidated	Can't be liquidated

If you keep your ICR above 110% and AICR above 150%, your trove can never be liquidated under normal mode or recovery mode.

Stablecoin collaterals have ratios of above 1.5 for the AICR calculation, which means a lower ICR trove is not going to be eligible for liquidation in recovery mode. For example if you have $10k of YUSD debt along with $11k in stablecoin collateral, say with safety ratio of 1.05, your ICR will be 115.5% and your AICR will be 176% (Assuming adjusted ratio 1.6). For stablecoin troves, if your trove ICR is above 110%, your AICR will be above 150% too, meaning you can't be liquidated in Recovery Mode or in Normal Mode. A basic guideline would be keeping some safety threshold in case there are small movements in the stablecoin price .

TLDR:

If your stablecoin trove is at ICR > 115%, liquidation risk will be low unless the stablecoin collateral depegs, in both normal and recovery mode.