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  • πŸ‘‹Welcome to DCNTRL - The future of Stablecoins
    • Introduction to DCNTRL Protocol
  • DCNTRL Features
    • πŸ’²USDEFI Stablecoin
      • πŸ’°Minting / Redeeming USDEFI
      • πŸ“ˆMaintaining the $USD Peg
      • πŸ’ΈEarning in USDEFI Stability Pool
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      • 🎁Earning DCNX
      • πŸ“ŠDCNX Tokenomics
      • 🏦Earn Protocol Revenue
      • πŸ’³How to Buy DCNX
    • πŸ›‘οΈEcosystem Stability
      • 🌊Liquidations
      • 🌑️Recovery Mode
  • User Guides
    • ⚑Getting Started with DCNTRL Protocol
      • 1️⃣Connecting Your Wallet
      • 2️⃣Getting BNB
    • 3️⃣Your Dashboard
    • 4️⃣Borrowing (Minting) USDEFI
      • βš™οΈManaging your USDEFI Position
    • 5️⃣Start Earning with USDEFI
      • How to Stake USDEFI
      • How to Unstake From Stability Pool
    • 6️⃣Redeem USDEFI - Get BNB
    • 7️⃣Liquidating Bad Debt
      • β†ͺ️How to Manually Liquidate Bad Debt
    • πŸ†How to stake DCNX to earn Protocol Revenue
  • Useful Docs
    • πŸ“ƒSmart Contract Audits
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On this page
  • Introduction
  • Who Can Liquidate Loan Positions?
  • How Does Liquidation Work?
  • What Compensation do you get for Liquidating Bad Debt?
  • How to Manually Liquidate Bad Debt:
  1. User Guides

Liquidating Bad Debt

PreviousRedeem USDEFI - Get BNBNextHow to Manually Liquidate Bad Debt

Last updated 1 year ago

Introduction

In the DCNTRL Protocol, maintaining the stability and health of the ecosystem is of utmost importance. One of the ways this is achieved is through the liquidation of loan positions that fall below the Minimum Collateral Ratio of 110%. This process is not only essential for the protocol's stability but also provides an opportunity for users to earn rewards. This guide will walk you through the process of identifying and liquidating bad debt.


Who Can Liquidate Loan Positions?

Any participant in the DCNTRL ecosystem can liquidate a loan position if it falls below the Minimum 110% Collateral Ratio. This ensures that the protocol remains robust and resilient, even when individual loan positions become under-collateralized.

How Does Liquidation Work?

When a loan position's Collateral Ratio falls below 110%, it becomes eligible for liquidation. Any user can initiate this process, which involves repaying a portion of the loan position's debt and in return, receiving a portion of its collateral. The liquidated debt is then added to the Stability Pool, while the remaining collateral is returned to the user who initiated the liquidation.

What Compensation do you get for Liquidating Bad Debt?

Initiating a liquidation incurs certain gas costs. To ensure that liquidation remains profitable for users, the DCNTRL Protocol provides a gas compensation for each liquidation.

This compensation is calculated using the formula:

Gas Compensation = 50 USDEFI + 0.5% of the loan position's collateral (BNB) The 50 USDEFI is funded by a levy, while the variable 0.5% portion (in BNB) comes from the liquidated collateral. This slightly diminishes the liquidation gain for Stability Providers but ensures that liquidators are adequately compensated for their efforts.


How to Manually Liquidate Bad Debt:

To initiate the liquidation process follow the guide πŸ‘‡

7️⃣
β†ͺ️How to Manually Liquidate Bad Debt