Stability pool
Maintaining USDVE peg
What is the Stability pool?
The Stability Pool is the first line of defense that maintains solvency in the Vaultedge system. It provides the liquidity needed to absorb debt from undercollateralized vaults during liquidations, ensuring that the total supply of USDVE remains fully backed by collateral at all times.
Users who deposit USDVE into the Stability Pool are called Stability Providers. When a liquidation occurs, the protocol uses USDVE from the pool to repay the vault’s debt, and distributes the entire collateral from that vault to Stability Providers, pro-rata.
Since vaults are only liquidated when their Individual Collateral Ratio (ICR) falls below the Minimum Collateral Ratio (MCR), liquidations are expected to result in a net gain for Stability Providers in most cases.
How does it work?
When a vault is liquidated:
The debt owed by the vault is burned from the Stability Pool’s balance
The full collateral from the liquidated vault is distributed proportionally to all active Stability Providers
This process is fully automatic and trustless
Providers may receive any whitelisted collateral used in the protocol, depending on which vaults are liquidated.
You can withdraw any received collateral at any time and sell or swap it for USDVE to reduce your exposure. However, all Stability Providers are exposed to all collateral types, not just the ones they may have personally borrowed against.
Why should i deposit USDVE to the Stability pool?
You earn liquidated collateral at a discount
Most liquidations occur with vaults just under the MCR threshold, making them profitable in USD terms
There are no lockups, and you can withdraw your deposit (or your received collateral) anytime there are no pending liquidations
What happens if the Stability Pool is empty when liquidations occur?
If the Stability Pool is depleted, Vaultedge triggers a secondary liquidation mechanism called redistribution.
In this case:
The debt and collateral of liquidated vaults are redistributed across healthy vaults with the same collateral type
Redistribution is done proportionally to each recipient vault’s collateral value
This is less optimal than using the Stability Pool but ensures continued system solvency
Can i withdraw my deposit whenever i want?
As a general rule, you can withdraw the deposit made to the Stability Pool at any time. There is no minimum lockup duration. However, you cannot withdraw while there are pending liquidatable vaults.
Can i lose money by depositing funds to the Stability Pool?
While Stability Providers typically receive more collateral than the USDVE they lose, losses are possible under rare edge cases, including:
Flash crashes, where a vault’s ICR drops below 100%
Oracle failures, resulting in incorrect collateral pricing
USDVE trading above $1, which could make the effective value of your burnt USDVE greater than the collateral received
However, in most market conditions, Stability Providers experience net gains and can swap their collateral back to USDVE at or above peg over time.
Losses are only realized if you withdraw immediately after an adverse event and sell at unfavorable prices.
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