# Recovery Mode

Recovery Mode activates when [**Total Collateral Ratio (TCR)**](https://doc.orby.network/overview/supported-collateral/collateral-risk-parameters) of a **specific collateral** falls below a set level. A TCR above the set level is considered healthy/normal. 

**TCR Formula:**

* Total dollar value of the respective collateral / Total dollar value of the corresponding debt 

#### **Collateral-Specific TCR:**

* Each collateral type has its own TCR, so values may differ.
  * Example: cdcETH TCR = 150% (another collateral might have a higher TCR).
* One collateral may be in Recovery Mode while another remains normal.

### Impact of Recovery Mode:

Using the above example, if **cdcETH** enters Recovery Mode:

* **Liquidation:**
  * Shuttles with a Total Collateral Ratio (TCR) below 150% can be liquidated.
* **Borrowing Restrictions:**
  * You will blocked from **cdcETH** borrowing that lowers the TCR further.
  * To borrow more, users must either:
    * Increase the Collateral Ratio of existing shuttles.
    * Open a new shuttle with a CR ≥ 150%.
* **Borrowing Cost:**
  * Reduced to 0% to encourage new and safe borrowing that meets the above criteria
* **Other Collaterals:**
  * Unaffected if those specific collaterals are not in Recovery Mode.

### Liquidation Details in Recovery Mode

In **Recovery Mode**, liquidation loss is limited to the [**Minimum Collateral Ratio (MCR)**](https://doc.orby.network/overview/supported-collateral/collateral-risk-parameters). This means that liquidators can only repay a shuttle’s debt **up to the MCR**.

* Any remaining collateral (between the **MCR and TCR**) can be **reclaimed by the borrower** through the standard shuttle interface.

**For Example, assume you have the following:**

* **Collateral:** $149
* **Debt:** $100
* **TCR:** 150%
* **MCR:** 135%
* **Liquidation Process:**
  * The user (CR of **149%**) will be flagged for liquidation.
  * **$100 of debt** will be repaid.
  * **$135 of collateral** is transferred out and split between the **liquidator** and **Stability Pool depositors**.
  * The user can **reclaim the remaining $14** of CDCETH.

#### Key Terms:

* **ICR:** Individual Collateral Ratio for shuttles
* **MCR:** Minimum Collateral Ratio for shuttles
* **TCR:** Total Collateral Ratio for shuttles
* **SP:** Stability Pool

## Commonly asked questions

<details>

<summary>What's the TLDR?</summary>

* We aim for $USC to always be backed by more than a dollar's worth of collateral
  * Recovery Mode is a key risk management feature to ensure this
* It is recommended to keep your shuttle's collateral ratio at 180% to lower the possibility of being liquidated

</details>

<details>

<summary>What is Normal Mode</summary>

When the TCR of $cdcETH is above 190%, the system is in Normal Mode. No impact to users.&#x20;

</details>

<details>

<summary>What is Cautious Mode?</summary>

When the TCR of $cdcETH is between 150 - 190%, the system is in Cautious Mode. No impact to users - but we recommend maintaining your shuttle collateral ratio at at least 180%

</details>

<details>

<summary>What is Recovery Mode?</summary>

When the TCR of $cdcETH is below 150%, the system is in Recovery Mode. Any shuttles with collateral ratio below 150% will be liquidated

</details>