Recovery Mode

Recovery Mode is triggered when a pool’s TCR falls below the CCR, and is designed to ensure that aUSD always remains over-collateralized by a sufficient amount. Instances of recovery mode are rare, brief, and isolated to the associated collateral pool.

TCR < CCR → Recovery Mode Active

The TCR is the ratio of the total dollar amount in collateral in the protocol at the current price, to its total debt. Each collateral asset has a different TCR, they are siloed and managed separately.

When Recovery Mode is active, any position below the CCR may be liquidated. Liquidations are ordered starting with the position that is least collateralized and ending with the most collateralized. Recovery mode is active until the TCR is above the CCR. Liquidation happens at the MCR and the user keeps the difference.

Example:

A user opens a position with WETH. The TCR of WETH drops to 110% – below the CCR of 120%, so recovery mode turns on. Their collateral ratio at this time is 115% and they are at risk of being liquidated. If they get liquidated, the liquidation will occur at the MCR of 108% and they will be able to claim the difference of (115 – 108) = 7% in collateral.