Stability Pool

The first line of defense in maintaining system solvency

Stability Pool Overview

The Stability Pool is a crucial element of the Agilely ecosystem, serving as the first line of defense in maintaining system solvency. During the liquidation process, the debt of the liquidated Vaults is repaid by the Stability Pool to ensure that the total USDA supply always remains backed, while the collateral is distributed among Stability Providers. The Stability Pool is funded by users transferring USDA into it (called Stability Providers).

Benefits for Stability Providers

Stability Providers have the opportunity to earn profits from liquidations. When a Vault is liquidated, Stability Providers receive a portion of the liquidated collateral as a reward. For each collateral's stability pool, a bonus parameter is set, indicating the maximum profits depositors can earn from liquidations. There are two scenarios as outlined below when liquidation occurs (CR < MCR):
  1. 1.
    100% + Bonus <= CR*(1-0.5%). In this situation, remaining collateral after equivalent debt, bonus and gas compensation are taken would be returned to the borrowers.
  2. 2.
    CR*(1-0.5%) < 100% + Bonus. No remaining collateral would be returned.

No Lockup Duration

In general, you can withdraw your deposited funds from the Stability Pool at any time without a minimum lockup duration. However, withdrawals may be temporarily suspended if there are unliquidated Positions with a CR below the set MCR.

Possible Risks

  1. 1.
    Extreme Market Condition: While liquidations are typically designed to occur at a CR well below 100%, it's important to consider potential risks in extreme market conditions or sudden price fluctuations that could lead to liquidations beyond 100%. In such cases, Stability Providers may face a reduction in their deposited value.
  2. 2.
    USDA Depeg: In specific scenarios where USDA is trading above $1, liquidations might become unprofitable for Stability Providers, even when CRs are larger than 100%. Consequently, the gains from liquidations may not fully offset potential losses.

What if the Stability Pool is empty?

If the Stability Pool is empty, the system uses a secondary liquidation mechanism called redistribution. In such a case, the system redistributes the debt and collateral from liquidated Positions to all other existing Positions. The redistribution of debt and collateral is done in proportion to the recipient Position's collateral amount.