Liquidations

Liquidation is the process of selling collateral and repaying debt to ensure that there is enough collateral backing the VOLT from a vault.

It occurs when all of the collateral in a vault is sold by someone other than the owner of the collateral to cover the costs of repaying the vault's debt.

The collateral to debt ratio represents the relationship between the value of locked collateral in a vault and the debt that the vault has outstanding.

If a vault falls below the liquidation ratio, liquidators repay all of the vault's debt and withdraw the locked collateral tokens as compensation.

The liquidation process has been changed from Mai Finance to better benefit both the liquidator and the platform. Instead of solely taking repayment fees, the platform now takes half of the discount as fees while the liquidator receives the other half.

For example, let's consider voltGNS with a minimum ratio of 150%, which is equivalent to a 66% Loan to Value ratio. If the LTV of voltGNS reaches 66%, it becomes eligible for liquidation. In this case, the liquidator would receive half of the 34% discount, or 17%, and the platform would receive the remaining 17% as fees. If the collateral is worth $1000, the liquidator would get it for $830, while the platform would receive $170 in fees.

This change ensures that the liquidators receive a substantial discount while also providing the platform with a fair share of the fees. Additionally, the platform will hold the fees in the form of staked voltGNS, which will provide extra APY for those with voltGNS vaults. The same principles apply for gDAI as well as all the future assets that will be added as collateral.