Stability Pool

What is the Stability Pool?

The Stability Pool serves as Lyve's first line of defense in maintaining the system's financial stability. Users, known as Stability Providers, contribute LYU tokens to this pool, which then acts as a source of liquidity for repaying debt from liquidated Troves.

How Can You Benefit as a Stability Provider?

As a Stability Provider, you stand to gain from liquidations. For example, if you have a deposit constituting around 10% of the pool's total LYU and a Trove is liquidated, your share of the liquidated collateral will be proportional to your deposit. The profits from liquidations are inversely related to the Trove's LTV, meaning you could obtain collateral at a discounted rate.

Liquidations: What Happens?

When a Trove's LTV exceeds the set limit, it is liquidated, and its debt is absorbed by the Stability Pool. The liquidated collateral is then distributed among the Stability Providers. The original Trove owner retains the LYU borrowed but loses the collateral.

Can You Withdraw Your Stability Pool Deposit?

Generally, you can withdraw your deposit at any time. However, withdrawals are paused if there are Troves with an LTV higher than the protocol-defined limit awaiting liquidation.

Are There Risks?

While the system aims to liquidate Troves at LTVs below 100%, unforeseen events like flash crashes or oracle failures could result in losses for Stability Providers. Note that despite thorough auditing, the risk of system failures cannot be completely eliminated.

What if the Stability Pool Runs Dry?

In the unlikely event that the Stability Pool is empty during a wave of liquidations, Lyve employs a secondary mechanism known as 'redistribution,' where the debt and collateral from liquidated Troves are redistributed among existing Troves.

Who Can Perform Liquidations?

Anyone can initiate a Trove liquidation once its LTV exceeds the maximum allowed by the protocol. The person initiating the liquidation receives a gas fee compensation and a portion of the Trove's collateral as an incentive.