110%collateral ratios, it is expected that Stability Providers will receive a greater dollar-value of collateral relative to the debt they pay off.
~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 YUSD + 0.5% of Trove's collateral
1,000,000 YUSDin the Stability Pool and your deposit is
200,000 YUSDand collateral of
400 ibTKNis liquidated at an ibTKN 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 YUSD), i.e. from
80,000 YUSD. In return, you will gain
10%of the liquidated collateral, i.e.
40 ibTKN, which is currently worth
$21,800. Your net gain from the liquidation is
100%. In this case, the liquidation process does not go through the stability pool and instead debt/collateral is redistributed to active troves.
$1, liquidations may become unprofitable for Stability Providers even at collateral ratios higher than
100%. However, this loss is hypothetical since YUSD is expected to return to the peg, so the “loss” only materializes if you had withdrawn your deposit and sold the YUSD at a price above