🏊Stability Pool
The USDFC reserve that absorbs liquidations
The Stability Pool is the protocol's liquidation engine: a shared reserve of USDFC used to repay the debt of Troves that fall below the minimum collateral ratio, up to the USDFC it holds. It converts a solvency threat into an orderly exchange — bad debt is burned, and the liquidated collateral flows to the depositors who funded the pool.
How a liquidation flows through the pool
A Trove drops below 110% and someone triggers its liquidation.
USDFC equal to the Trove's debt is burned from the pool, extinguishing the debt.
The Trove's FIL collateral (minus the liquidator's 0.5% cut) is credited to depositors.
Both effects are shared pro rata: if you hold 2% of the pool, 2% of the burned USDFC comes from your deposit and 2% of the seized FIL becomes yours:
where "FIL allocated to the pool" is the liquidated collateral after the liquidator's 0.5% share — and, when the pool only partly covers a debt or a Recovery Mode liquidation is capped at 110%, only the corresponding fraction of it. Your share is measured immediately before the liquidation.
Why depositing is attractive
A Trove is liquidated below 110% but above 100% in the typical case — so the pool takes on, say, $105–109 of FIL for every $100 of USDFC it burns (before the liquidator's 0.5% share; roughly $104.5–108.5 after it). Depositors are effectively buying FIL below market price, paid for by liquidated borrowers. The trade-off: your stable asset converts into a volatile one at unpredictable times, and in a severe crash a Trove can be liquidated below roughly 100.5% — the point where the collateral, net of the liquidator's share, no longer covers the debt — making that particular liquidation a net loss for the pool.
There is no lock-up period, but withdrawals are suspended while liquidatable Troves (below 110%) are pending, so the pool cannot be drained just before it's needed — and, like other operations that need a price, they also revert while the price feed cannot return a usable price. See the hands-on guide for deposits, claims, and withdrawals in the app.
If the pool runs dry — redistribution
The Stability Pool can only absorb debt it actually holds. If a liquidation exceeds the pool's balance, the protocol falls back to redistribution: the remaining debt and collateral of the liquidated Trove are spread across all active Troves, proportionally to their collateral. This applies to Troves below 110%; in Recovery Mode, a Trove between 110% and the TCR is never redistributed — it is simply not liquidated until the pool can cover its entire debt.
For a receiving Trove, this means both its debt and its collateral increase. Whether that is a net gain depends on the liquidated Trove's ratio: measured before the liquidator's 0.5% cut, redistribution breaks even at roughly 100.5% — above that, the collateral received is worth more than the debt taken on; below it, receivers absorb a shortfall. Either way, a Trove that was healthier than the liquidated one sees its own collateral ratio drop, so a deep cascade pushes the whole system toward Recovery Mode. A well-funded Stability Pool limits how often that happens, but cannot rule it out.
Where next
Liquidation — the full liquidation mechanics, including the liquidator's role
Using the Stability Pool — depositing and withdrawing in the app
Recovery Mode — what happens when the whole system is stressed
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