🌡️Recovery Mode
This page provides a comprehensive overview of Recovery Mode in the DCNTRL Protocol. It explains what Recovery Mode is, when it's activated, and what measures are implemented during this period.
Last updated
This page provides a comprehensive overview of Recovery Mode in the DCNTRL Protocol. It explains what Recovery Mode is, when it's activated, and what measures are implemented during this period.
Last updated
In the world of decentralized finance, protocols must be prepared to handle extreme market conditions. The DCNTRL Protocol is no exception. To ensure the stability and security of the system, the protocol includes a mechanism known as "Recovery Mode." This page provides a comprehensive overview of Recovery Mode and its role in the DCNTRL ecosystem.
In the event of a market downturn, DCNTRL Protocol activates a Recovery Mode to protect the system and its users. Recovery Mode is a set of measures designed to ensure the sustainability and longevity of the ecosystem during adverse market conditions.
During Recovery Mode, the protocol implements a series of protective measures to safeguard the interests of its users and maintain the stability of USDEFI. These measures are designed to mitigate the risks associated with market volatility and ensure that the protocol can continue to operate effectively.
Recovery Mode is activated when the system's Total Collateral Ratio (TCR) drops below 150%.
During Recovery Mode, any loan position with a collateral ratio less than 150% is subject to liquidation.
Furthermore, the system restricts borrower transactions that might further deplete the TCR. New USDEFI can only be minted by adjusting existing loan positions to improve their collateral ratio, or by opening a new loan position with a collateral ratio of 150% or more. Generally, if an existing loan position's adjustment lowers its collateral ratio, the transaction will only proceed if the resulting TCR is above 150%.
The Total Collateral Ratio, or TCR, is the ratio of the dollar value of the entire system's collateral at the current BNB:USD rate to the entire system's debt. Essentially, it's the sum of the collateral from all loan positions in USD, divided by the debt from all loan positions expressed in USDEFI.
Recovery Mode aims to encourage borrowers to take actions that quickly lift the TCR above 150% again, and it motivates USDEFI holders to restock the Stability Pool.
In economic terms, Recovery Mode promotes the addition of collateral and debt repayments and serves as a self-canceling deterrent: its poDCNTRLial onset actually steers the system away from ever reaching it. Recovery Mode is not an ideal state for the system.
While Recovery Mode does not affect the redemption fee, it sets the borrowing fee to 0% to maximize borrowing (within the boundaries explained here).
By raising your collateral ratio to 150% or more, your loan position will be safeguarded from liquidation. This can be achieved by adding more collateral, paying off debt, or a combination of both.
Yes, if your loan position's collateral ratio falls below 150%, you are at risk of liquidation. To prevent liquidation in Normal Mode and Recovery Mode, a user should maintain their collateral ratio above 150%.
Recovery Mode is a critical component of the DCNTRL Protocol's risk management strategy. It ensures that the protocol can withstand extreme market conditions and continue to provide a secure and stable platform for its users. By understanding Recovery Mode, users can better appreciate the measures taken by the DCNTRL Protocol to protect their interests and maintain the stability of the system.
