How recovery mode keeps USH sufficiently collateralized

What is recovery mode?

Why does Hedge need a recovery mode?

What needs to happen for recovery mode to be triggered?

1. Many vaults created with low collateral ratios

2. The price of the collateral decreases

Recovery mode is per vault type

How does the system get out of recovery mode?

1. Raising the threshold for vault liquidation

2. Preventing actions that would impair system health

  • Taking a loan: Increasing the debt in the system would decrease the collateral ratio, so we need to prevent this from happening in recovery mode. However, paying back loans is possible.
  • Withdrawing collateral: Decreasing the collateral in the system would decrease collateral ratio, so again, it’s not something we allow in recovery mode. However, depositing additional collateral is possible.

What does this mean for me as a Hedge user?

  • Understand the collateral ratio that triggers recovery mode (for the current SOL-110 vault type in Hedge, it’s 150%). We want users to be well informed about the possible actions that can happen to their vaults.
  • Maintain a high collateral ratio in your vault (over 150% for SOL-110 vaults).
  • In practice, this means watching the price of your collateral (in this case, SOL). If the price of collateral decreases, ensure that you add more collateral to the vault or pay off part of your loan.

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