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Description
When a trove is liquidated, then depending on system conditions, some of its Stable-token debt gets offset with stable-tokens in the Stability Pool: that is, the offset debt evaporates, and an equal amount of LUSD tokens in the Stability Pool is burned.
Thus, a liquidation causes each depositor to receive a stable-token loss, in proportion to their deposit as a share of total deposits. They also receive a SOL gain, as the SOL collateral of the liquidated trove is distributed among Stability depositors, in the same proportion.
When a liquidation occurs, it depletes every deposit by the same fraction: for example, a liquidation that depletes 40% of the total stable-token in the Stability Pool, depletes 40% of each deposit. A deposit that has experienced a series of liquidations is termed a "compounded deposit": each liquidation depletes the deposit, multiplying it by some factor in range [0,1].