Introducing Liquidation Feature of PERI
Liquidation process will start running on PERI staking dApp starting June 24th, 2022. If your C-ratio is under 150% by then, your assets will get LIQUIDATED!
What is “liquidation” in PERI ecosystem?
In traditional finance, liquidation occurs when a company or group must sell some of its assets at a loss to cover a debt.
PERI liquidations are similar in that users take out debt as they mint pUSD by staking PERI, USDC, and DAI. When they mint pUSD, they are providing the aforementioned crypto assets as collateral to back the debt, pUSD.
Thus, PERI liquidation is the process by which a smart contract sells crypto assets to cover the debt.
Liquidation is basically a stop-loss for PERI stakers. The liquidation threshold protects the staker from a sharp price drop of collateralized assets.
PERI’s default collateral to debt ratio is 400% — the value of collateral is 400% of debt generated from minting pUSD. If the staker’s c-ratio falls to the liquidation threshold of 150% or is unable to support the staker’s debt value, the protocol will allow someone else to repay his debt, at a discount, in exchange for the collateralized asset.
In the process, the staker has to take a 10% liquidation penalty that goes to liquidators as a premium for carrying out liquidations.
PERI Staking dApp offers hefty incentives, also known as liquidation bonuses, to liquidators-those who buy the discounted collateral and cover the account’s debt. In PERI, the discount rate is 10% which comes from the staker’s penalty.
Usually, PERI lets liquidators carry out the juicy liquidation process first. But there are 2 conditions under which the protocol intervenes and carry out the liquidation process itself.
- C-ratio falls to 120% or under
- There’s no liquidator taking the debt within 24 hours of the debt being listed on PERI liquidation list.
PERI team has decided to carry out the liquidation process in the above 2 cases in order to protect all the stakeholders from greater loss.
PERI Liquidation Process
Here’s a step-by-step process of PERI staking dApp’s liquidation.
- Liquidation module gets activated when C-ratio falls below 150%.
- A warning message and a countdown appear on the right end of the UI.
- If the user recovers his C-ratio to above 150% level, he can be saved from liquidation by pressing the “escape” button next to the countdown.
*The user must press the “escape” button to be saved from liquidation, or his asset will be liquidated even if his C-ratio recovers to 150%
- If the user fails to recover his C-ratio within the given 24 hours, his asset gets registered for liquidation.
- Once under-collateralized assets are listed on the list, liquidators can participate in the liquidation process by buying the debts with sweet 10% discount.
About PERI Finance
PERI Finance is a decentralized, cross-chain mirrored asset issuance and derivatives exchange on the Polkadot, Kusama, and Moonriver network. PERI Finance allows accessing a wide range of both traditional financial and crypto assets in the form of leverage and non-leverage mirrored products. PERI Finance empowers users with the lower GAS fee, speedy transactions, and ample security from front-running or flash loan.