šŸ§©Trove

What means a Trove?

A Trove is a minter account. It allows users to:

  • Deposit ZETA/LSDs as collateral

  • Minting up to 77% of the deposited value in zbrUSD

  • Maintain, close and manage their loan

Each Trove is linked to a single Ethereum address, so each address can only have one Trove. This simplifies the system and prevents users from opening multiple Troves. Within a Trove, there are 3 elements tracked:

  1. Collateral balance: The amount of assets deposited as collateral. Users can add more assets to their Trove at any time to increase their borrowing power.

  2. Debt balance: The amount of zbrUSD minted. Users can repay some or all of their debt at any time.

  3. Annual fee: The amount of zbrUSD as interest rate.

So in summary, a Trove allows users to deposit, mint zbrUSD, manage their loan, and maintain a sufficient collateral ratio to avoid liquidation.

What is the collateral ratio?

The collateral ratio is the ratio of the value of collateral in a Trove compared to the Trove's debt.

For ZEBRA protocol, the collateral is LSDs and the debt and annual fee are denominated in zbrUSD. The collateral ratio fluctuates over time based on 3 factors:

  1. ZETA price changes - If the ZETA price rises, the value of collateral increases and the ratio goes up. If ZETA price falls, the ratio goes down.

  2. Changes to collateral or debt - By adding more assets to the Trove or repaying, the ratio can be adjusted.

  3. Change of time

For example, if

  • ZETA price is $2

  • Trove has 100,000 ZETA deposited ($200,000 value)

  • Trove has minted 100,000 zbrUSD, where 500 zbrUSD minting fees applies

Then the collateral ratio is:

\frac{$200,000}{$100,500+0} = 199.005\%

After 1 year, the collateral ratio is

\frac{$200,000}{$100,500+1.5\%*$100,500} = 199.005\%

Users need to monitor this ratio to ensure their Trove has sufficient collateral to cover its debt.

What is the minimum collateral ratio (MCR)?

The minimum collateral ratio, aka MCR, refers to the lowest acceptable ratio of minted zbrUSD to collateral assets needed to avoid liquidation. The protocol sets a minimum collateral ratio parameter 130%. This means if you have borrowed 10,000 zbrUSD, you will need at least $15,000 worth of collateral assets posted to avoid liquidation.

When do I need to close my trove?

You do not have a fixed repayment schedule. As long as you maintain a sufficient collateral ratio in your Trove (at least 130%), your trove can remain open indefinitely.

However, you'll want to monitor:

  • Liquidation risk if ZETA price drops

  • Increasing borrowing fees and annual fees over time

  • Opportunity cost of not holding your LSDs

You decide when the optimal time is to repay, based on the above factors.

What happens if Trove gets liquidated or redeemed against?

If your Trove is liquidated:

  • You will lose all your collateral as it is used to pay off your debt

  • A liquidation therefore means you lose about 30% of the value of your collateral assets.

Details are in Liquidation chapter.

If your trove is redeemed against:

There would be two different scenarios:

  • Partial redemption: both debt and collateral decreased, CR increased

  • Full redemption: trove closed, debt gone while collateral decreased

Note that both scenarios do not result in net loss for your portfolio, details are in Redemption chapter.

Who can liquidate Troves?

Anybody can liquidate a Trove as soon as it drops below the Minimum Collateral Ratio of 130%. The initiator receives a gas compensation (2 zbrUSD + 0.5% of the Trove's collateral) as reward for this service.

What caused Trove's collateral and debt to increase without user's involvement?

If Troves are liquidated and the Stability Pool is empty (or becomes empty due to the liquidation), all minters will receive a share of the liquidated collateral and debt through a redistribution process.

This only happens when extreme downside market conditions.

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