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This is the ratio between the Dollar value of the collateral in your Trove and its debt in USDE. The collateral ratio of your Trove will fluctuate over time as the price of collateral changes. You can influence the ratio by adjusting your Trove’s collateral and/or debt — i.e. adding more collateral or paying off some of your debt.
For example: Let’s say the current price of ETH is
$1,000and the current price of stETH is
1and stand you decide to deposit
10 stETH. If you borrow
10,000 USDE, then the collateral ratio for your Trove are as follows:
Collateral Value: 10ETH * $1000 + 10stETH * 1 * $1000
Collateral ratio: Collateral Value / 10000USDE * 100% = 200%
Loans issued by the protocol do not have a repayment schedule. You can leave your Trove open and repay your debt any time, as long as you maintain a collateral ratio of at least
The minimum collateral ratio (or MCR for short) is the lowest ratio of debt to collateral that will not trigger a liquidation under normal operations (aka Normal Mode). This is a protocol parameter that is set to
110%. So if your Trove has a debt
10,000 USDE, you would need at least
$11,000worth of collateral posted as collateral to avoid being liquidated.
By making liquidation immediate and more efficient, ERD requires less collateral to achieve the same level of security as protocols that rely on lengthy auction mechanisms to sell liquidated collateral.