Protocol Stability
Last updated
Last updated
syUSD is backed by an overcollateralized CDP model designed to maintain system solvency under all conditions. This is enforced through real-time collateral ratio monitoring, liquidation systems, and soon, the introduction of a stability pool.
Each position that mints syUSD must maintain a minimum collateral ratio (CR) above 150%. This ensures that every unit of syUSD is backed by more value than it represents. The system also monitors the global CR — the average across all open positions.
• If the global CR drops below 150%, the protocol will automatically pause all new syUSD minting.
• Existing positions remain untouched but cannot be expanded until the system re-stabilizes.
When a vault’s collateral ratio drops below its minimum, it becomes eligible for liquidation. The protocol calculates a liquidation price for each position — the point where the value of the collateral is too low to support the outstanding syUSD.
• Liquidations are currently executed by external arbitrage bots, who monitor the network and act the moment a vault crosses its liquidation threshold.
• The collateral is sold (or seized) to repay the outstanding syUSD, removing risk from the system and maintaining solvency.
Liquidations are permissionless and on-chain, ensuring trustless execution without centralized actors.
To improve liquidation efficiency and protocol decentralization, a Stability Pool will soon be added. This pool will:
• Allow users to deposit syUSD and passively participate in liquidations.
• Be used by the protocol to cover undercollateralized positions instantly, without relying solely on external bots.
• Distribute liquidation rewards to pool participants.