🚨Recovery Mode
The stricter rules that activate when the whole system is under-collateralized
Recovery Mode is the protocol's defense against systemic under-collateralization. It activates automatically whenever the Total Collateral Ratio (TCR) — the combined collateral of all Troves against all debt — falls below 150%, and deactivates the moment the TCR is back at or above 150%. It is not an opt-in feature or an edge case for advanced users: when it triggers, its rules apply to every Trove at once.
During Recovery Mode, Troves below the current TCR can be liquidated — not just those below 110%. If the TCR is 145%, a Trove at 140% is at risk (a Trove at or above 110% is only liquidated when the Stability Pool can absorb its entire debt; see the table below). This is why keeping a ratio comfortably above 150% matters even in calm times.
The app shows a prominent Recovery Mode notice on the Dashboard whenever it is active.
What changes
Liquidation threshold
110%
Current TCR (< 150%); Troves at or above 110% only if the Stability Pool covers their whole debt
Borrowing fee
Base Rate + 0.5% (capped at 5%)
0%
Minimum ratio for a new Trove
110%
150%
Collateral withdrawal
Allowed (above 110%)
Not allowed
Debt increase
Allowed (above 110%)
Only if the Trove ends at ≥ 150% and its ratio does not decrease
Repaying debt
Allowed
Allowed (down to the 200 USDFC minimum)
Closing a Trove
Allowed (unless it would push the TCR below 150%)
Not allowed
Every restriction points the same direction: adjustments that push the system back above 150% are free and easy; adjustments that would drain collateral — including closing a Trove, which returns its collateral — are blocked. The fee waiver removes any cost friction from repairing your position, and the 150% floor on new borrowing ensures new activity strengthens the TCR rather than diluting it.
The 150% line is guarded in Normal Mode too: any operation that would push the TCR below 150% — opening a Trove, increasing debt, withdrawing collateral, or closing a Trove — is rejected before it can trigger Recovery Mode.
Liquidation behavior in Recovery Mode
Liquidation becomes condition-dependent, balancing the Stability Pool's capacity against each Trove's ratio:
ICR ≤ 100%
Redistribute all debt and collateral (minus gas compensation) to active Troves.
100% < ICR < 110% & SP USDFC ≥ Trove debt
USDFC in the Stability Pool equal to the Trove's debt is offset with the Trove's debt. The Trove's FIL collateral (minus gas compensation) is shared between depositors.
100% < ICR < 110% & SP USDFC < Trove debt
The total Stability Pool USDFC is offset with an equal amount of debt from the Trove. A fraction of the Trove's collateral (after gas compensation, equal to the ratio of its offset debt to its entire debt) is shared between depositors. The remaining debt and collateral (minus gas compensation) is redistributed to active Troves.
110% ≤ ICR < TCR & SP USDFC >= Trove debt
The Stability Pool USDFC is offset with an equal amount of debt from the Trove. A fraction of FIL collateral with dollar value equal to 1.1 * debt (minus gas compensation) is shared between depositors. Nothing is redistributed to other active Troves. Any remaining collateral (zero if the ICR was exactly 110%) is sent to the CollSurplusPool and is claimable by the borrower. The Trove is closed.
110% ≤ ICR < TCR & SP USDFC < Trove debt
Do nothing.
ICR ≥ 110% & ICR ≥ TCR
Do nothing.
Where ICR = Individual Collateral Ratio, TCR = Total Collateral Ratio, SP = Stability Pool.
Note the important protection in the fourth row: a Trove liquidated above 110% only loses collateral worth 110% of its debt — the surplus goes to the CollSurplusPool and remains claimable by the borrower. Recovery Mode liquidation is capped, not confiscatory.
A typical episode
FIL drops sharply; the TCR crosses below 150% and Recovery Mode activates. The Dashboard shows the notice.
Troves below the TCR become liquidatable (those at or above 110% only while the Stability Pool can cover their whole debt); their owners add collateral or repay (fee-free) to climb above it, while liquidators work through those that don't.
Top-ups raise the TCR, and so do liquidations that offset debt through the Stability Pool (redistribution alone moves debt and collateral between Troves without improving the TCR). Once the TCR reaches 150%, Recovery Mode ends and the 110% threshold and normal fees return.
What to do as a borrower
Before: the real defense happens in Normal Mode — keeping your ratio well above 150% (the app labels 200%+ as very low risk) means Recovery Mode is mostly something you observe rather than suffer — though the withdrawal and closure restrictions apply to every Trove.
During: add collateral or repay debt immediately if you're below the TCR; both improve your ratio and the system's. Remember collateral withdrawal is blocked, so you cannot rebalance out — only in.
Not available: closing your Trove. Closing returns collateral to you, so it is blocked until Recovery Mode ends — you can repay debt down to the 200 USDFC minimum in the meantime.
Where next
Liquidation — the normal-mode liquidation these rules extend
Stability Pool — the pool whose capacity shapes the table above
Monitoring Your Position — staying ahead of the TCR
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