Minted USDx can be used to participate in the liquidation process, while simultaneously earning rewards. Find out how you can participate and earn additional income with your USDx.
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Liquidations in USDx operate by storing a pool of USDx within the protocol in a place called the "BackstopPool", and using that USDx to offset debt and unlock collateral when a loan becomes endangered (health falls below the MCR).
In order to incentivise USDx deposits to the BackstopPool, the following incentives are presented to depositors:
Inflationary ORX rewards (if turned on). See Backstop Pool incentives allocation in The Ouroboros ($ORX) Token supply breakdown.
The ability to purchase discounted collaterals automatically during liquidations
Once this central pool of USDx is ready, the protocol still requires manual intervention by either bots, or regular users, in order to trigger liquidation transactions. These transactions are individually incentivised via a collateral, and USDx rewards. 200 USDx, and 0.5% of the liquidated collateral, are available for simply clicking the Liquidate button on an endangered loan, or using the batch liquidator.
Note: Liquidations can be monitored and triggered here: ouroboros.foundation/usdx#/liquidations
So now that we know where the capital comes from when performing liquidations, and how they are triggered, let's talk about how to provide to that pool of liquidating capital (the Backstop Pool), what happens to the staked/supplied USDx in that pool during a liquidation, and also how USDx providers are incentivised to supply their capital.
To stake your USDx, simply go to the USDX STAKING tab, click START STAKE, and enter the amount of USDx you would like to provide. Once your transaction is confirmed, you will see your participation stats.
After your deposit is complete, we can observe the following stats...
USDx Deposit APR: The APR of ORX inflationary rewards for providing to the liquidation pool
Current Stake: The current amount of USDx you have staked within the Backstop Pool. This figure reduces each time a liquidation occurs.
Pool Share: Your share of the Backstop Pool. This figure is important to know, as liquidation rewards are divided out according to your share within the pool. In other words, if you occupy 50% of the pool, then you will contribute 50% of the USDx toward liquidating a position, and get a 50% share of the liquidated rewards.
Yield: Your currently accrued ORX rewards. This number increases every-time a user interacts with the pool, rather than on a timed basis. You need to claim your ORX to start the vesting process, which follows the same schedule as TitanX deposits to the ORX Minter.
Let’s say there is a total of 1,000,000 USDx in the Stability Pool and your deposit is 100,000 USDx.
Now, if we assume an MCR/Liquidation Ratio of 110% for TitanX, a Position with a debt of 200,000 USDx, collateral of 615,000,000,000 TitanX, and a current TitanX price of $0.000000355, we can observe that this position has a current collateral ratio of 109%~, and is thus liquidated.
(100 * (615,000,000,000 * 0.000000355) / 200,000) == 109%
Given that your pool share is 10%, your deposit will go down by 10% of the liquidated debt (20,000 USDx), i.e. from 100,000 to 80,000 USDx. In return, you will gain 10% of the liquidated collateral, i.e. 61,500,000,000 TitanX, which is currently worth approx $21,800~. Your net gain from the liquidation is $1,800.
Note that you can immediately withdraw the collateral received from liquidations and sell it to reduce exposure to the underlying collateral, if the USD value of the collateral is expected to decrease. The only exception to USDx withdrawals, is that they are not possible while there are pending Positions to liquidate.
Firstly, they must be activated. You will know if these rewards are activated, since the APR figure will be displayed above the collateral icon list
While activated, every depositor in the BackstopPool will earn ongoing ORX inflationary rewards, at every pool touchpoint. As other users interact with the pool, your ORX rewards will increase. In order to claim these rewards, you are required to do one of the following:
Interact with the pool by withdrawing/depositing USDx
Manually claiming via the 'Claim Rewards' button.
Participating in the liquidation process, in any form, offers an attractive mix of direct, passive, and real yield rewards. It is not however, a fully passive form of yield. When participating in the BackstopPool, check back often to ensure that the particular mix of earned collateral, and USDx deposits, matches your desired exposure profile, and recompound rewards often to lock in more stable value for your portfolio.
Once claimed, your ORX rewards will be vested in the exact same manner as those given out for TitanX deposits into the ORX Minter. You can understand these unlock mechanics by checking the page. ORX earned via Yield Farming, will be displayed as such. To minimise gas costs, consider claiming ORX rewards at fixed intervals, rather than at every available opportunity.
