🥩 Stability Pool Staking

🥩 Stability Pool Staking

Stability Pool Mechanics

The Stability Pool in the Roots protocol is designed to absorb liquidations and maintain system stability. Users can stake $MEAD in the Stability Pool to earn rewards and participate in liquidations.

How It Works

  1. Staking $MEAD: Users deposit $MEAD into the Stability Pool.
  2. Liquidation Event: When a borrowing position falls below the Liquidation Threshold (120% collateral ratio), it is liquidated.
  3. Debt Repayment: The $MEAD in the Stability Pool is used to repay the liquidated debt.
  4. Collateral Distribution: The collateral from the liquidated position is distributed to Stability Pool participants.

Benefits for Stability Pool Participants

  • Discounted Collateral: Participants receive collateral at a discount compared to market prices.
  • Arbitrage Opportunities: The discounted collateral can be held or sold on exchanges for a profit.

Collateral Surplus (Premium)

When a liquidation occurs, the collateral is sold at a discount, typically below the market value. This discount creates a surplus (premium) for Stability Pool participants.

How Users Earn the Surplus

  1. Liquidation Event: A position with a collateral ratio below 120% is liquidated.
  2. Debt Repayment: The $MEAD in the Stability Pool is used to repay the debt.
  3. Collateral Distribution: The liquidated collateral is distributed to Stability Pool participants at a discounted rate.
  4. Surplus (Premium): The difference between the market value of the collateral and the discounted rate at which it was acquired represents the surplus (premium) earned by participants.

Example

  • Staking: Deposit 100 $MEAD into the Stability Pool.
  • Liquidation Event: A position with 10 $BERA collateral and 100 $MEAD debt is liquidated.
  • Debt Repayment: 100 $MEAD from the Stability Pool is used to repay the debt.
  • Collateral Distribution: 10 $BERA is distributed to Stability Pool participants.
  • Surplus (Premium): If the market value of 10 $BERA is higher than the 100 $MEAD used to repay the debt, the difference is the surplus earned by participants.

Staking $MEAD

To stake $MEAD in the Stability Pool, follow these steps:

  1. Navigate to the Staking Section:
    • Go to the staking section of the Roots dApp.
  2. Connect Your Wallet:
    • Ensure your wallet is connected and holds $MEAD tokens.
  3. Stake $MEAD:
    • Select the amount of $MEAD you wish to stake and confirm the transaction in your wallet.
  4. Start Earning Rewards:
    • Your $MEAD tokens are now staked in the Stability Pool, and you will start earning rewards based on the pool’s yield generation mechanisms.

Important Considerations

  • Risk of Loss: Staked $MEAD is used to cover liquidated debt, which may result in a loss of $MEAD if the collateral value drops significantly.
  • Rewards: The primary reward for Stability Pool participants is the discounted collateral received from liquidations and the surplus (premium) earned from the difference between the market value and the discounted rate.

By staking $MEAD in the Stability Pool, users can earn rewards and contribute to the stability of the Roots protocol.

🔥 Liquidation🥳 Earning Rewards