🚨Liquidation

Storage Providers (SPs) must regularly monitor their Collateral-to-Debt Ratio (CDR) to ensure that their assets remain safe from liquidation. Maintaining a healthy CDR is essential, as falling into the liquidation threshold can result in the loss of collateral and other penalties.

Managing CDR to Prevent Liquidation

The FilUs protocol sets a liquidation threshold at a CDR level of 85%. A CDR of 85% or higher indicates a critical risk of liquidation, and SPs in this range should take immediate action to reduce their debt or increase their collateral. A CDR below 100% signifies that an SP is over-collateralized, meaning their collateral is sufficient to cover both the principal and interest owed to the liquidity pool in the event of liquidation.

What Happens in the Event of a Liquidation?

If an SP’s CDR exceeds the 85% threshold and no corrective actions are taken, the FilUs protocol will trigger a liquidation event to secure the liquidity pool. During a liquidation:

1. Repayment of Debt: All outstanding principal and interest owed by the SP are expected to be covered by the liquidation process, ensuring the liquidity pool remains whole.

2. Liquidation Commission : If there is excess FIL remaining after all debt and interest have been repaid, FilUs will apply a 10% commission fee (나중에 rate 정하기) to the surplus. This fee supports the protocol's treasury.

3. Excess FIL Return: Any remaining FIL after covering both the liquidity providers (LPs) and the FilUs treasury is returned to the SP.

By managing CDR proactively and keeping it below 85%, SPs can avoid the risks associated with liquidation, preserving their assets and maintaining access to FilUs services.