eBTC
  • Overview
    • Introduction
    • Basics
    • Terminology
    • Contract Addresses
    • eBTC Minting Incentives Program
  • Protocol Mechanics
    • Borrowing
    • Redemptions
    • Liquidations
    • Flash Loans
    • Normal & Recovery Mode
    • Oracles
    • Position Managers
  • Minimized Governance
    • Governed Parameters
    • Timelocks and Permissions
    • Transparency Dashboard and Tooling
  • Security
    • Audit Reports
    • Risk Analysis Report
  • Developer Docs
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  1. Protocol Mechanics

Normal & Recovery Mode

Normal Mode

Normal Mode refers to the regular state of operation of the system, in which it is considered to be safely distant from the potential for insolvency. As long as the TCR remains above the Critical Collateral Ratio (CCR) of 125%, the system will remain in Normal Mode.

During Normal Mode, liquidations occur when the Initial Collateral Ratio (ICR) falls below the Minimum Collateral Ratio (MCR) of 110%.

Recovery Mode

The system will go into Recovery Mode when the TCR falls below the CCR of 125%. In this mode, the system introduces changes to its mechanisms in order to incentivize certain user behaviours that lead to a rapid raise of the TCR back above 125%.

During Recovery Mode, the system introduces the following modifications to its mechanisms:

  • Any CDP whose ICR is below the TCR can be liquidated after the conclusion of the Grace Period. In a way, during Recovery Mode, the TCR becomes the liquidation threshold. This incentivizes rapid repayment or adjustment of CDPs with low ICR.

  • CDPs liquidated during Recovery Mode are prone to the same liquidation penalty as those liquidated during Normal Mode. This means that if a CDP is liquidated at 124%, it will take the same penalty as it would being liquidated at 110%. More details on liquidation penalties can be found in the dedicated section on the Liquidations page.

  • Borrowing is not allowed unless it helps improve the TCR and only at an ICR at or above 125%.

  • Adjusting a CDP is not allowed unless it helps to improve the TCR. This means that the CDP's resulting ICR from the adjustment must be higher than its initial. In other words, only debt repayment and/or collateral top-ups are allowed.

  • Increasing a CDP's debt is allowed as long as it is accompanied by a collateral deposit, ensuring that the resulting ICR is higher than its original and also above 125%.

  • Closing a CDP above or below the TCR is not allowed. Closing a CDP above the TCR would reduce this and allowing for a closure below it would be unfair to the former borrowers. Instead, borrowers with positions below the TCR are encouraged to top-up their collateral or repay as much of their debt as possible.

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Last updated 1 year ago

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