⚠️CDP liquidations
vault liquidation to ensure maintenance of system c-Ratios
as a collateral backed debt issuance platform, it is important that vault and system collateral is maintained at appropriate levels to back any fxToken debt; ensuring each remains representative of their underlying currencies face value. the core principles, underpinning the protocol liquidation process are;
if the collateral value, or c-Ratio, of a vault falls below its minimum c-Ratio, that vault is deemed to be 'at risk' or "underwater'. In this state it can be subject to a 1:1 redemption call on its collateral by fxToken holders.
this mechanism ensures that in the case an fxToken trades at a discount to its face value, an arbitrage opportunity exists, thus creating an incentive to drive it back to parity.
*only collateral from vaults that have a current c-Ratio < min c-Ratio can be redeemed against.
redemption contraction can be accessed through arbiscan.
if a vault's c-Ratio falls below its liquidation trigger it will automatically be subject to a liquidation process to repay excessive debt and bring the collateral ratios back to acceptable limits.
handle.fi makes use of its fxKeeper pools to ensure that liquidation is promptly triggered and executed.
vaults are liquidated when the c-Ratio falls below 160%
the liquidation process
when a vault falls below it's c-Ratio liquidation trigger, liquidation begins.
sufficient vault collateral is sold (largest position to smallest holdings) to repay enough fxToken debt and return the c-Ratio to its required minimum plus a 10% buffer.
a liquidation fee is the charged to the vault being liquidated. this fee is disbursed to protocol and the relevant fxKeeper pool that funded the liquidation. *any accrued $FOREX rewards for that vault are forfeited; transferred to the fxKeeper pool and protocol.
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