Stability pool for AquaUSD under 1 dollar and liquidations.

Automated Arbitrage Bot Algorithm for AquaUSD under 1 dollar and liquidations.

What is the Stability Pool?

The Stability Pool serves as the primary safeguard for maintaining system solvency by providing liquidity to cover the debt from liquidated vaults and supporting the peg of AquaUSD if it rises above $1. This mechanism ensures the AquaUSD supply remains fully backed. When a vault is liquidated, the Stability Pool burns an amount of AquaUSD equal to the vault's remaining debt, thereby repaying it. In return, the collateral from the liquidated vault is transferred to the Stability Pool.

When AquaUSD is used to support the peg on a DEX if it rises above $1, AquaUSD is sold, and in return, more USDT is received and transferred to the Stability Pool.

Users can contribute to the Stability Pool by depositing their AquaUSD, becoming Stability Providers. These providers gradually lose a proportional share of their AquaUSD deposits but gain an equivalent share of the liquidated collateral. Since vaults are typically liquidated at collateral ratios just below 150%, Stability Providers are expected to receive collateral worth more than the debt they cover.

Additionally, by arbitraging the price when AquaUSD rises above $1, more USDT is received in return, further benefiting the Stability Pool.

Why should I deposit AquaUSD to the Stability Pool?

Stability Providers will make liquidation/arbitrage gains (see below) and receive early adopter rewards in form of AquaXP tokens.

What are liquidations?

To ensure the entire stablecoin supply is fully backed by collateral, any Vault with a collateral ratio below 150% will be liquidated. When this happens, the debt from the Vault is either partially or fully canceled and absorbed by the Stability Pool, with its collateral then distributed among the Stability Providers.

The owner of the liquidated Vault retains the full amount of AquaUSD borrowed but incurs an approximate 10% loss in value. Therefore, it's crucial to maintain a collateral ratio above 150%, ideally above 200%, to avoid liquidation and potential losses.

Who can liquidate vaults?

Anybody can liquidate a vault as soon as it drops below the Minimum Collateral Ratio of 150%.

How am I compensated for liquidating a Vault?

See our incentive program

How do I benefit as a Stability Provider from liquidations?

When liquidations occur just below a 150% collateral ratio, you are likely to experience a net gain. For example, if the Stability Pool contains 1,000,000 AquaUSD and your deposit is 100,000 AquaUSD, a Vault with a debt of 200,000 AquaUSD and collateral of 120,000 stTON might be liquidated at a stTON price of $2. This equates to a collateral ratio of 120% (calculated as 100% * (120,000 * 2) / 200,000).

With your pool share at 10%, your deposit would decrease by 10% of the liquidated debt (20,000 AquaUSD), reducing your balance from 100,000 to 80,000 AquaUSD. In exchange, you would receive 10% of the liquidated collateral, which is 12,000 - 0.005*12,000 = 11,940 stTON (0.5% repayment fee), currently valued at $23,880. This results in a net gain of $3,880 from the liquidation.

Depositors can immediately withdraw the collateral received from liquidations and sell it to mitigate exposure to stTON, particularly if they anticipate a decline in its USD value. (For exceptions, see "Can I withdraw my deposit whenever I want?")

How do I benefit as a Stability Provider from arbitrage?

Similarly, when arbitraging the price of AquaUSD above $1, you can experience a net gain. For example, if the Stability Pool contains 1,000,000 AquaUSD and your deposit is 100,000 AquaUSD, and AquaUSD is trading at $1.05, the pool might sell 200,000 AquaUSD on a DEX. Assuming the arbitrage is executed at this price, the pool would receive $210,000 USDT (calculated as 200,000 * 1.05).

With your pool share at 10%, your deposit would decrease by 10% of the sold amount (20,000 AquaUSD), reducing your balance from 100,000 to 80,000 AquaUSD. In exchange, you would receive 10% of the received USDT, which is $21,000 USDT. This results in a net gain of $1,000 USDT from the arbitrage.

Arbitraging AquaUSD above $1 not only helps stabilize its price but also benefits Stability Providers by increasing the USDT received, which can be transferred to the Stability Pool or withdrawn as needed.

How do I benefit as a Stability Provider from early adopter rewards?

See our incentive program

Can I withdraw my deposit whenever I want

As a general rule, you can withdraw your deposit from the Stability Pool at any time, as there is no minimum lockup duration. However, withdrawals are temporarily suspended if there are liquidatable Vaults with a collateral ratio below 150% that have not yet been liquidated.

What oracle are you using to determine the price of TON?

The protocol uses the Pyth network price feed and will automatically fail all transactions if the TON:USD oracle meets any of the following extreme conditions:

• The Pyth network price has not been updated for more than 4 hours.

• The Pyth network response call reverts, returns an invalid price, or an invalid timestamp.

• The price change between two consecutive Pyth network price updates exceeds 50%.

Can I lose money by depositing funds to the Stability Pool?

While liquidations will occur at a collateral ratio well above 100% most of the time, it is theoretically possible that a Vault gets liquidated below 100% in a flash crash or due to an oracle failure. In such a case, you may experience a loss since the collateral gain will be smaller than the reduction of your deposit.

Please note that although the system is diligently audited, a hack or a bug that results in losses for the users can never be fully excluded.

What happens if the Stability Pool is empty when liquidations occur?

If the Stability Pool is empty, the system activates a secondary liquidation mechanism called redistribution. In this scenario, the debt and collateral from the liquidated Vault are redistributed among all other existing Vaults. This redistribution is proportional to the collateral amount of each recipient Vault.

Planned Features for Version 1

• One Address with AquaUSD

Planned Features for Version 2

• LP Tokens: Anyone could participate. Users receive LP tokens in exchange for their investments in the arbitrage pool. These tokens grant access to rewards for staking AquaUSD.