> For the complete documentation index, see [llms.txt](https://docs.indigoprotocol.io/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.indigoprotocol.io/readme/stability-pools-and-liquidations.md).

# Stability Pools

## Overview 🌐

### Purpose of Stability Pools

Stability Pools play a pivotal role in maintaining iAsset solvency by providing liquidity to repay debts from liquidated CDPs, ensuring all minted iAsset supply remains overcollateralized. Each iAsset, such as iBTC, has its dedicated Stability Pool, composed of iAssets deposited by users, also known as "Stability Providers."

## Functionality 🔄

### Liquidation and Compensation

When CDPs become undercollateralized and are liquidated, iAssets in the corresponding Stability Pool are burned to repay the CDP's debt. Stability Providers lose a pro-rata share of their iAsset deposits but gain a pro-rata share of the liquidated CDP's collateral.

In [Indigo Protocol V3](/readme/indigo-protocol-v3.md), liquidation payouts can include multi-asset rewards — Stability Providers earn the collateral asset type backing the liquidated CDP (ADA or CNT), not just ADA.

## Depositing iAssets 💼

#### How to Deposit

If you own iAssets, either through opening a CDP and minting iAssets or purchasing them from a DEX, you can deposit your iAssets into the corresponding Stability Pool and earn rewards from liquidations and interest revenue.

#### Reward

In addition to receiving a pro-rata share of a liquidated CDP's collateral, Stability Providers earn rewards from interest revenue distribution (40% of collected interest is allocated to Stability Pool depositors in V3) and INDY staking rewards where applicable.

## Balance Changes 📉

### Why the Shrinkage?

A reduced iAsset balance in the Stability Pool indicates that liquidations have occurred, burning a portion of your iAsset deposit. In return, you receive a pro-rata share of the liquidated CDP's collateral in the asset type backing that CDP.

## **Fees 💸**

In Indigo Protocol V3, the fees associated with Stability Pools have been updated:

* **Initial Deposit Fee:** A 5 ADA fee is charged when depositing iAssets into a Stability Pool for the first time. This fee is redistributed to all Stability Pool providers as a reward for their participation.
* **Withdrawal Fee:** A 0.5% fee applies when withdrawing iAssets from a Stability Pool. This fee is designed to discourage opportunistic behavior and is redistributed among Stability Pool depositors as a loyalty bonus.
* **Account Adjustment Cooldown:** A cooldown period ensures an account cannot continuously perform actions against the Stability Pool. This replaces the account adjustment fee, which is removed in V3.
* **Transaction Fee:** A 1 ADA fee applies for each transaction involving deposits, withdrawals, or claiming rewards. This fee is redistributed to all Stability Pool providers.
* **Reward Fee:** A 2% fee is taken from the total ADA rewards owed to a user and redistributed to INDY Stakers. This fee can be adjusted by the DAO to align with protocol requirements and community feedback.


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