π Stability Pools
Overview π
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 π
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.
Depositing iAssets πΌ
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 INDY rewards and ADA from liquidations
Reward
In addition to receiving a pro-rata share of a liquidated CDP's collateral, Stability Providers earn rewards in the form of INDY.
Balance Changes π
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 ADA collateral.
Fees πΈ
In Indigo Protocol V2, the fees associated with Stability Pools have been updated to ensure the protocol's efficiency and sustainability. The new fee structure is as follows:
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.
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.
Last updated