⚖️Stability Pool & Liquidations

Stability Pool and Liquidations on BOOKUSD

The Stability Pool plays a crucial role in maintaining the health of the BOOKUSD protocol by absorbing debt from liquidated troves. This ensures the stability of BUD and protects the system from under-collateralized loans. In BOOKUSD, collateral is denominated in BOOK.

Stability Pool Overview:

The Stability Pool is a collective pool where users deposit BUD to help secure the system. When a trove is liquidated, the Stability Pool absorbs its debt and receives the liquidated BOOK collateral in return. Depositor Role: Stability Pool depositors support the protocol by providing BUD to cover liquidated troves. Rewards: In exchange, depositors earn BOOK (from liquidations) and BUS Tokens as incentives.

Liquidations:

A Vault is liquidated if its collateral-to-debt ratio falls below the minimum collateral ratio (140%). Liquidations ensure that the protocol remains solvent and that BUD remains fully backed. How Liquidations Work: The liquidated debt is canceled by the Stability Pool using deposited BUD. The troves BOOK collateral is distributed to Stability Pool depositors proportional to their BUSD contribution.

Example: Suppose a trove has: Debt: 1,000 BUD Collateral: $1,400 BOOK. If the collateral ratio falls below 140%, the trove is liquidated. The Stability Pool absorbs 1,000 BUD of debt. Depositors in the Stability Pool receive $1,400 BOOK as collateral.

Stability Pool Rewards:

Stability Pool participants earn rewards for their role in stabilizing the protocol: BOOK Gains: Depositors receive BOOK from liquidated troves. BUS Rewards: Additional BUS tokens are distributed as an incentive for participating in the Stability Pool.

Benefit of Participating in the Stability Pool:

Earn Collateral: Depositors receive BOOK at a potentially discounted rate during liquidations. BUS Rewards: Passive income through governance token rewards. Support Protocol Stability: Depositors contribute to the health and stability of the BOOKUSD system