RUSD Stability Pool

What is the Stability Pool?

The Stability Pool is the first line of defense in maintaining system solvency. It achieves that by acting as the source of liquidity to repay debt from liquidated Troves—ensuring that the total RUSD supply always remains backed.

When any Trove is liquidated, an amount of LUSD corresponding to the remaining debt of the Trove is burned from the Stability Pool’s balance to repay its debt. In exchange, the entire collateral from the Trove is transferred to the Stability Pool.

The Stability Pool is funded by users transferring RUSD into it (called Stability Providers). Over time Stability Providers lose a pro-rata share of their RUSD deposits, while gaining a pro-rata share of the liquidated collateral. However, because Troves are likely to be liquidated at just below 110% collateral ratios, it is expected that Stability Providers will receive a greater dollar-value of collateral relative to the debt they pay off.

Why should I deposit RUSD to the Stability Pool?

Stability Providers will make liquidation gains and receive early adopter rewards in form of REG tokens.

What are liquidations?

To ensure that the entire stablecoin supply remains fully backed by collateral, Troves that fall under the minimum collateral ratio of 110% will be closed (liquidated).

The debt of the Trove is canceled and absorbed by the Stability Pool and its collateral distributed among Stability Providers.

The owner of the Trove still keeps the full amount of LUSD borrowed but loses ~10% value overall hence it is critical to always keep the ratio above 110%, ideally above 150%.

Who can liquidate Troves?

Anybody can liquidate a Trove as soon as it drops below the Minimum Collateral Ratio of 110%. The initiator receives a gas compensation (200 LUSD + 0.5% of the Trove's collateral) as reward for this service.

How am I compensated for liquidating a Trove?

The liquidation of Troves is connected with certain gas costs which the initiator has to cover. The cost per Trove was reduced by implementing batch liquidations of up to 95 Troves but with the aim of ensuring that liquidations remain profitable even in times of soaring gas prices the protocol offers a gas compensation given by the following formula:

gas compensation = 10 RUSD + 0.1% of Trove's collateral (BNB)

This is cheaper than Liquity protocol's 200 LUSD + 0.5% of Trove's collateral (BNB) as Regular Protocol is on BSC and thanks to BSC, the gas cost is much cheaper than current Ethereum mainnet.

The 10 RUSD is funded by a Liquidation Reserve while the variable 0.1% part (in BNB) comes from the liquidated collateral, slightly reducing the liquidation gain for Stability Providers.

What is the Liquidation Reserve?

When you open a Trove and draw a loan, 200 LUSD is set aside as a way to compensate gas costs for the transaction sender in the event your Trove being liquidated. The Liquidation Reserve is fully refundable if your Trove is not liquidated, and is given back to you when you close your Trove by repaying your debt. The Liquidation Reserve counts as debt and is taken into account for the calculation of a Trove's collateral ratio, slightly increasing the actual collateral requirements.

How do I benefit as a Stability Provider from liquidations?

As liquidations happen just below a collateral ratio of 110%, you will most likely experience a net gain whenever a Trove is liquidated.

Let’s say there is a total of 1,000,000 RUSD in the Stability Pool and your deposit is 100,000 RUSD.

Now, a Trove with debt of 200,000 RUSD and collateral of 400 BNB is liquidated at an BNB 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 RUSD), i.e. from 100,000 to 80,000 RUSD. In return, you will gain 10% of the liquidated collateral, i.e. 40 BNB, which is currently worth $21,800. Your net gain from the liquidation is $1,800.

Can I withdraw my deposit whenever I want?

As a general rule, you can withdraw the deposit made to the Stability Pool at any time. There is no minimum lockup duration. However, withdrawals are temporarily suspended whenever there are liquidatable Troves with a collateral ratio below 110% that have not been liquidated yet.

What oracle are you using to determine the price of BNB?

The protocol uses Chainlink’s BNB:USD price feed, and when the conditions below met, it relies on the Band Protocol BNB:USD oracle under the following (extreme) conditions:

• Chainlink price has not been updated for more than 4 hours

• Chainlink response call reverts, returns an invalid price or an invalid timestamp

• The price change between two consecutive Chainlink price updates is >50%.

Can I lose money by depositing funds to the Stability Pool?

Please refer Liquity docs.

What happens if the Stability Pool is empty when liquidations occur?

Please refer Liquity docs.