Earning in USDEFI Stability Pool
Last updated
Last updated
The Stability Pool is a crucial component of the DCNTRL Protocol, playing a key role in maintaining the USDEFI peg and the overall health of the system. This page provides an in-depth overview of the benefits of staking USDEFI in the Stability Pool and how it can lead to increased DCNTRL rewards and protocol revenue.
When a loan position is liquidated, a sum of USDEFI equivalent to the remaining debt of the loan position is eliminated from the Stability Pool's balance to settle its obligation. Conversely, the entire collateral from the loan position is transferred to the Stability Pool.
The Stability Pool is sustained by users who transfer USDEFI into it (known as Stability Providers). As time passes, Stability Providers lose a portion of their USDEFI deposits proportionally, while simultaneously acquiring a similar share of the liquidated collateral. Since loan positions are expected to be liquidated at just below 110% collateral ratios, Stability Providers are projected to receive a higher dollar-value of collateral in comparison to the debt they cover.
The Stability Pool serves as a backstop for the DCNTRL Protocol, ensuring that all USDEFI in circulation is fully backed by BNB collateral. When a borrower's collateralization ratio falls below the required minimum, the Stability Pool automatically liquidates the position, using USDEFI from the pool to cover the debt and adding the liquidated BNB collateral to the pool.
Staking USDEFI in the Stability Pool offers several benefits:
When a loan position is liquidated, the staker's USDEFI is used to cover the debt, and in return, they receive a proportionate share of the liquidated BNB collateral. Since liquidations are triggered when the collateralization ratio falls below 110%, stakers are likely to receive more BNB than the USDEFI they used, resulting in a profit.
In addition to liquidation profits, stakers also earn DCNX rewards. These rewards serve as an incentive for users to stake their USDEFI in the Stability Pool, contributing to the stability of the system.
Staking in the Stability Pool not only earns you DCNX rewards but also unlocks additional protocol revenue. Here's how it works:
DCNX is more than just a reward token. When staked it represents a claim on a portion of the protocol's revenue. The more DCNX you stake, the larger your share of the protocol's revenue.
By staking your USDEFI in the Stability Pool, you earn DCNX rewards. These rewards increase your holdings, which in turn be staked to increase your share of the protocol's revenue. This creates a positive feedback loop, where staking in the Stability Pool leads to higher DCNX earnings, which leads to more protocol revenue, further boosting your DCNX earnings.
Staking USDEFI in the Stability Pool offers a unique opportunity to support the stability of the DCNTRL Protocol while earning liquidation profits and DCNX rewards. These rewards not only provide an immediate benefit but also unlock additional protocol revenue, creating a powerful incentive for users to contribute to the Stability Pool.
For more detailed information on the Stability Pool and DCNX rewards, please refer to the respective pages linked throughout this overview.
Learn more about liquidations
Learn more about DCNX
