What are the benefits of adding liquidation to the system?
It creates a stronger incentive for stakers to maintain a healthy C-Ratio, because if they do not they will be liquidated with a penalty.
This creates stronger incentives for a healthy network C-Ratio, as other network participants can actively improve the network C-Ratio by liquidating stakers below the liquidation ratio.
It provides a solution to staking wallets that have been abandoned or whose private keys have been lost, as they will no longer drag down the network C-Ratio.
Once a person's C-Ratio goes below the liquidation ratio, and they are flagged, they will have 8 hours to raise their C-Ratio. In this scenario, one of three things will happen:
Your C-Ratio goes below the liquidation ratio, and you are flagged and do not self-liquidate.
You will be liquidated and incur a forced liquidation penalty on your staked SyTON; your SyTON will be used to pay off your debt, and you will be left with what is leftover; all penalty SyTON will be distributed to other stakers.
Your C-Ratio goes below the liquidation ratio, and you are flagged, and you self-liquidate. Your liquidated SyTON will be used to pay off your debt, leaving you with what is leftover.
You will be liquidated and incur a self-liquidation penalty on your staked SyTON; all penalty SyTON will be distributed to other stakers.
Your C-Ratio is above the target c-ratio after being flagged b/c you burned syUSD or minted new debt.
Nothing will happen; you will not be liquidated.
Alternatively, you can utilize the self-liquidation mechanism at any point below the target ratio.
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