Stability Pool Activities

The Stability Pool is important in ensuring the financial stability of the system as the first line of defense in balancing Vault liquidations. It works by using the stability deposits of BPD to absorb and cancel out any debt from defaulted Vaults which helps in maintaining system solvency. As a reward, participants of the Stability Pool (those that deposit BPD into the pool) can acquire collateral from liquidated positions at a substantial discount.

Stability Pool providers will receive an allocation of MP tokens as an additional reward for having deposited into the Stability Pool.

If someone is interested in becoming a Stability Provider, they can deposit BPD into the Stability Pool. It is important to note that deposited tokens can be withdrawn from the pool at any time, provided they have not been utilized for absorbing defaulted Vaults. However, there are restrictions on withdrawal during times when there are undercollateralized Vaults in the system that can be liquidated. These restrictions are in place to ensure better overall system solvency.

The proportion of a Stability Provider’s current deposit relative to the total BPD in the pool determines the collateral share that they will receive from the liquidation. In other words, the more BPD a Stability Provider has deposited into the pool, the larger the collateral share will be in the event of a liquidation. Therefore, it is beneficial for Stability Providers to have a large deposit of BPD tokens in the pool to increase their potential rewards in the case of liquidation and to receive a greater share of the MP token reward allocation.

Stability Providers have the freedom to withdraw their BPD deposit from the Stability Pool either fully or partially. It is important to note that the system always pays out the depositor’s entire collateral gain. Stability Providers who are also borrowers have the option to transfer their collateral gain to their Vaults instead of withdrawing it to their RSK wallet addresses. In this case, the accumulated BTC is used to increase the borrower’s collateral, effectively topping up their Vaults.