Ensuring Risk Management and Recovery on Orby Network
A Primer on Orby Network’s key features — Part 3
GM Orbies!
This is Captain Orby at the helm. 🚀🎙️
Welcome to our in-depth exploration series, as we dive into the heart of Orby — exploring key features, understanding their purpose, and breaking down what it all means for you as a user.
For those cosmic adventurers who are just joining our ranks, or if you’ve drifted a bit off course, you can find our foundational articles here:
- Introduction to Orby Network
- Navigating Stability: How Orby’s USC Maintains Its Dollar Peg
- The Pulse of Orby: Streamlining Liquidations for Efficiency and Inclusivity
Monitoring overall protocol risk
Risk monitoring is a critical component within Orby. A key prevention mechanism that we have employed is the concept of “Recovery Mode”, which is explained in more detail below.
Recovery Mode
Recovery Mode activates when the Total Collateral Ratio (TCR) of a specific collateral falls below a certain level. TCR is defined as the total dollar value of a collateral divided by the total dollar value of the corresponding debt.
During Recovery Mode, the liquidation threshold is temporarily raised up to the TCR level for the affected collateral, which helps to avoid a scenario of insufficient collateralisation on Orby. Moreover, the system blocks any transactions that would lower the TCR any further. For example, an existing user will only be allowed to submit an action if it improves his overall collateral ratio. In addition, a new user will only be able to mint new USC as long as his collateral ratio is above the TCR.
The objective of Recovery Mode is to encourage behaviours that will eventually raise the TCR back above a specified healthy level for that collateral type.
What does it mean for you?
Recovery Mode is designed to incentivize borrowers to behave in ways that raise the TCR. In addition to blocking actions that would lower the TCR, minting fees for borrowing new USC drop to 0% — this helps to encourage more healthy levels of borrowing on the protocol.
A key risk to users is the possibility of getting liquidated when Recovery Mode kicks in. In order to keep your position safe in Recovery Mode, users are encouraged to maintain their collateral ratio above the TCR, which is currently at 150%. This can be done by adding more collateral, repaying debt, or both.
So, Orbies, there you have it — the mechanics, the tricks, and what it all means for you. Be sure to follow us on our socials to keep updated on any latest developments! 🚀
Captain Orby out🎙️
