Stability Pool, What is it?
…And how to Stake USDM

The Stability Pool plays a crucial role in keeping the system financially sound. It serves as a safety net by providing the necessary funds to cover debts when Troves (individual borrowing positions) are liquidated. This ensures that the total supply of a stablecoin USDM is always backed by real assets.

How it Works:

  1. Liquidation Event:

    • When a Trove gets liquidated (usually when its collateral drops just below 110%), the remaining debt is paid off using the USDM staked in the Stability Pool.

  2. USDM Burning and Collateral Transfer:

    • The USDM equivalent to the Trove's remaining debt is "burned" (removed from circulation), and the entire collateral from the liquidated Trove is transferred to the Stability Pool stakers.

  3. Funding by Stability Providers:

    • Users contribute to the Stability Pool by depositing (staking) USDM, and they are referred to as Stability Providers.

  4. Pro-Rata Changes:

    • Over time, Stability Providers experience changes in their deposits and gains. They lose a proportionate share of their USDM deposits and gain an equal proportion of the liquidated collateral (ETH or TELOS)

  5. Expected Value for Stability Providers:

    • Since Troves are likely to be liquidated just below a 110% collateral ratio, Stability Providers are anticipated to receive more in collateral value than the debt they paid off. This aims to provide a balance where Stability Providers are reasonably compensated for their contribution.

In essence, the Stability Pool acts as a financial buffer to keep the system balanced. Stability Providers contribute to this pool, and in return, they participate in the gains and losses associated with liquidated collateral. The design aims to create a fair system where providers are rewarded for their support.

How to stake USDM:

  1. Make sure you currently hold the amount of USDM you would like to stake in your wallet. If you need USDM you can either open a TROVE

Head over to the stability Tab

https://daftpage.s3.amazonaws.com/projects/clln4ccur004v08l2eh4r0qry/assets/chrome-capture-2023-11-11-wdff5d.png

Click start staking

https://daftpage.s3.amazonaws.com/projects/clln4ccur004v08l2eh4r0qry/assets/chrome-capture-2023-11-14-6m5ox2.png

Enter the amount of USDM you would like to stake

https://daftpage.s3.amazonaws.com/projects/clln4ccur004v08l2eh4r0qry/assets/chrome-capture-2023-11-14-3-9u8os1.png

Click confirm, approve in your wallet, and that is it!