⚠️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

  1. when a vault falls below it's c-Ratio liquidation trigger, liquidation begins.

  2. 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.

  3. 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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