Recovery Mode

Recovery Mode activates when Total Collateral Ratio (TCR) 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). 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

What's the TLDR?

• 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

What is Normal Mode

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

What is Cautious Mode?

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%

What is Recovery Mode?

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