Introducing 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. It is maintained as long as the Total Collateral Ratio (TCR) remains above the Critical Collateral Ratio (CCR) threshold of 125%.
In Normal Mode, liquidations are triggered when the Initial Collateral Ratio (ICR) dips below the Minimum Collateral Ratio (MCR) of 110%. This mode ensures the stability and integrity of the system, providing a framework for efficient operations and risk management within the ecosystem.
Introducing Recovery Mode
Recovery Mode occurs when the TCR falls below the CCR of 125%. In this mode, the system introduces modifications to incentivize behaviors that raise the TCR back above 125% rapidly:
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 of the documentation.
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.
❓ If you find yourself in need of additional assistance along your eBTC journey, feel free to explore our Support Help Center or directly contact us. We're here to address any questions or concerns you may encounter within the eBTC ecosystem. Just click the chat button at the bottom right-hand corner of the screen and send our support team a message.