Core Features
Liquity is a decentralized borrowing protocol that offers unprecedented benefits for borrowers.
Liquidations Overview
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.
Efficient Liquidations
Liquidations ensure that borrowing protocols remain solvent. Thus, Liquity’s quick and efficient liquidations of Troves that fall under the minimum collateral ratio of 110% maintain the health and stability of the protocol.
Liquidation is performed in the following order of priority:
- Offsetting: The LUSD tokens in the Stability Pool are used to repay the undercollateralized debt and are subsequently burned. The collateral from the liquidated Trove is sent to the Stability Pool.
- Redistribution: If the Stability Pool does not contain sufficient LUSD to cover the debt, the (remaining) debt and collateral from the liquidated Trove is redistributed to all active borrowers in proportion to their own collateral amounts.
Liquidators are incentivized to execute prompt liquidations while stability providers benefit from contributing to the system’s Stability Pool.