Key Terms
- Collateral-to-loan Ratio (CTL) This is the ratio between the value of the collateral and the outstanding value of the stablecoin loan. It can easily be calculated by dividing the value of the collateral by that of the loan. Users should note that their CTL can change according to changes in the price of their collateral, and in changes to their loan value, which will decrease when the user repays some or all of the debt, otherwise it will gradually increase per the respective vault's stability fee.
- Liquidation Ratio (LR) This is the minimum CTL that a vault can have before it is liquidated. Any vault that has its CTL drop below the LR will be liquidated.
- Stability Fee The stability fee is the interest rate for stablecoin vaults. Each vault will have its own stability fee. The stability fee will be charged based on the initial outstanding stablecoin debt for every CDP opened.
- Liquidation When a vault's CTL drops below that of LR it is liquidated. When a vault is liquidated its collateral is auctioned off to bidders who bid to purchase that CDP's collateral at a discount by paying that CDP's outstanding stablecoin debt
- Liquidation Penalty The liquidation penalty is a percent-based fee that is charged on the collateral for all liquidated vaults. This is fee is meant to incentivize users to maintain a healthy CDP, and to cover the discount that will be given to liquidators.
Last modified 1yr ago