Liquidation

Liquidation is the process where Liquidator proxy repays other user’s outstanding debt. Liquidation reduces WCD(including Stability Fee) the user must repay, but also reduces the user’s collateral.

What causes liquidation

Liquidation occurs when the value of a user's collateral drops dramatically. If the collateral's value drops, the user's LTV increases, and if LTV reaches a certain level(Liquidation LTV), Liquidation may be triggered.

$$LTV = Minted~WCD / Collateral~Value$$

However, Liquidation due to accumulation of Stability Fee is unlikely as it would require extended period of time to accumulate enough Stability Fee to trigger Liquidation.

The need for Liquidation

Liquidation is an essential system for maintaining the over-collateralization of WCD in Kurrency. It ensures that Kurrency always has collateral worth more than the amount of minted WCD.

Liquidators

Liquidator proxy repays other user’s outstanding debt. In exchange, Liquidator receives portion of the user’s collateral.

Liquidation Fee

Liquidator may receive collateral worth slightly more than the total value of WCD that has been proxy repaid, and the difference is Liquidation Fee that the Liquidator receives. Liquidation Fee depends on the risks involved in Liquidation, such as a depreciation of collateral, slippage and gas costs.

$$Liquidation~Fee = Proxy~Repaid~WCD~*~Liquidation~Fee ~Rate$$