🤝Managing Collateral Effectively
Learn how to manage your collateral to maintain a healthy Trove
Prerequisites
An active Trove with FIL collateral
Access to the USDFC application
Connected wallet with FIL for additional collateral (if adding)
Overview
Managing your collateral effectively is crucial for maintaining a healthy Trove and avoiding liquidation. This guide will show you how to add or withdraw collateral, and how to determine the optimal collateral ratio for your risk tolerance.
Step 1: Access Your Trove
First, you need to access your existing Trove in the USDFC application.
Navigate to the USDFC application
Connect your wallet if not already connected
Go to the "Trove" section on the USDFC Dashboard page
Review your current collateral amount, debt, and collateral ratio

Step 2: Select "Adjust Trove"
To manage your collateral, you need to adjust your Trove.
Click on the "Adjust" button
This will open the Trove adjustment interface

Step 3: Add or Withdraw Collateral
Now you can add more collateral or withdraw some of your existing collateral.
To Add Collateral:
In the adjustment interface, locate the "Collateral" input field
Increase the amount of FIL from your current value
The system will automatically calculate your new collateral ratio
Adding collateral increases your collateral ratio and reduces liquidation risk

To Withdraw Collateral:
In the adjustment interface, locate the "Collateral" input field
Decrease the amount of FIL from your current value
The system will automatically calculate your new collateral ratio
Ensure your new collateral ratio remains above the minimum required (110%)

Step 4: Review Transaction Details
Before confirming, review all transaction details carefully.
Check the collateral adjustment amount
Verify your new collateral ratio
Understand how this affects your liquidation risk
Review any fees that will be applied
Step 5: Confirm and Execute
Once you're satisfied with the details, you can proceed with the adjustment.
Click the "Confirm" button
Confirm the transaction in your wallet
Wait for the transaction to be processed on the blockchain

Step 6: Verify the Adjustment
After the transaction is confirmed, verify that your collateral was adjusted successfully.
Check that your Trove details have been updated with the new collateral amount
Verify your new collateral ratio
If withdrawing collateral, confirm that the FIL has been added to your wallet balance

Understanding Collateral Ratios
Key Collateral Ratio Thresholds
Minimum Collateral Ratio (MCR)
110%
The absolute minimum ratio required to avoid liquidation
Recovery Mode Threshold
150%
When the system enters Recovery Mode if the Total Collateral Ratio falls below this
Recommended Safe Ratio
200%+
A conservative ratio that provides a good buffer against price fluctuations
Calculating Your Liquidation Price
To calculate the FIL price at which your Trove would reach the minimum collateral ratio (110%):
[Image: Visual representation of the liquidation price calculation]
Strategies for Collateral Management
Conservative Strategy (Low Risk)
Maintain a collateral ratio of 200% or higher
Add collateral proactively when FIL price starts to decline
Smaller USDFC minting relative to collateral value
Balanced Strategy (Medium Risk)
Maintain a collateral ratio between 150% and 200%
Monitor FIL price regularly and adjust as needed
Balance between capital efficiency and safety
Aggressive Strategy (High Risk)
Maintain a collateral ratio between 110% and 150%
Requires very active monitoring and quick reactions to price changes
Maximizes capital efficiency but has higher liquidation risk
[Image: Visual comparison of different collateral management strategies]
Next Steps
Monitor your position regularly to stay informed about your Trove's health
Consider depositing USDFC into the Stability Pool to earn rewards
Learn about Recovery Mode and how it affects your Trove
Troubleshooting
Cannot Withdraw Collateral: Your withdrawal might push your collateral ratio below the minimum requirement
Transaction Failed: Ensure you have enough FIL for gas fees
Collateral Not Showing: Refresh the page or check your transaction history
Common Questions
Q: How often should I adjust my collateral? A: This depends on your risk tolerance and FIL price volatility. More volatile markets require more frequent adjustments.
Q: What happens if FIL price drops suddenly? A: If the price drop causes your collateral ratio to fall below the minimum requirement (110%), your Trove may be liquidated.
Q: Can I add collateral without minting more USDFC? A: Yes, you can add collateral without changing your debt amount to increase your collateral ratio.
Q: Is there a fee for adjusting my collateral? A: Adding collateral only incurs gas fees. Withdrawing collateral may incur both gas fees and a small protocol fee.
Related Topics
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