Liquidation Scenarios
Last updated
Last updated
Most Liquidations occur within 1st Liquidation LTV, and follows below scenario :
User A mints WCD with collateral
Depreciation of collateral (or accumulation of Stability Fee) leads LTV to exceed 1st Liquidation LTV
Liquidators can proxy repay up to 50% of User A’s Outstanding Debt
[Proxy Repayment x (1 + Liq. Fee)] is liquidated from User A’s collateral.
Liquidation is concluded if LTV is lower than 1st Liquidation LTV. If not, Liquidation Procedure is returned to Step 2.
When collateral depreciates rapidly, 2nd Liquidation may be exceeded and follow below scenario :
User A mints WCD with collateral
Depreciation of collateral (or accumulation of Stability Fee) leads LTV to exceed 2nd Liquidation LTV
Liquidators can proxy repay up to 10)% of User A’s Outstanding Debt
[Proxy Repayment x (1 + Liq. Fee)] is liquidated from User A’s collateral
Liquidation is concluded if LTV is lower than 1st Liquidation LTV. If not, Liquidation Procedure is returned to Step 2.
When Liquidation occurs, Kurrency immediately burns WCD proxy repaid by Liquidator (excluding WCD corresponding to accumulated Stability Fee). Even when collateral deposited in Kurrency depreciates, this process helps maintain over-collateralization of WCD by decreasing the amount of WCD minted. However, since accumulated Stability Fee has to be distributed to WCD Depositors, WCD corresponding to accumulated Stability Fee is not burnt, but rather distributed to WCD Depositors as intended.
