Welcome to another deep dive into the unique features of Gravita Protocol. Today, we focus on the Stability Pool — a core component of our system that not only ensures solvency but also provides intriguing opportunities for Stability Providers.
Before we proceed, we’re excited to announce that our comprehensive documentation is now live! You can access it at Gravita Documentation. It provides a wealth of information about Gravita Protocol, including detailed insights into its various features, functionality, and the broader ecosystem.
What is the Stability Pool?
The Stability Pool is designed to enable users to supply GRAI, our native debt token, which is then utilized to purchase liquidated collateral at a discount, such as rETH, wETH, and wstETH. It acts as the primary line of defense for GRAI, ensuring its supply remains adequately backed by collateral.
How does the Stability Pool work?
When a Vessel is liquidated, an equivalent amount of GRAI is burnt from the Stability Pool’s balance to offset its debt. In return, the entire collateral from the Vessel is transferred to the Stability Pool. This mechanism allows Stability Providers to gain a pro-rata share of liquidated collateral over time, even though they lose a proportionate share of their GRAI deposits.
Why deposit GRAI to the Stability Pool?
By acting as Stability Providers, users can earn profits from liquidations. They acquire collateral at a discount relative to its market value, leading to potential profits when the market is favorable. For instance, when a WETH Vessel is liquidated, users can expect to acquire WETH at approximately a 10% discount.
How do liquidations work?
To ensure the entire GRAI supply remains fully backed by collateral, Vessels that exceed the maximum Loan-to-Value (LTV) ratio are liquidated. The debt of the Vessel is absorbed by the Stability Pool, and its collateral is distributed among Stability Providers. The Vessel’s owner retains the full amount of GRAI borrowed, but the overall value loss underlines the importance of maintaining an LTV ratio above the protocol-set limit.
Can I withdraw my deposit at any time?
Generally, you can withdraw your deposit from the Stability Pool whenever you want, as there is no minimum lockup duration. However, withdrawals may be temporarily suspended if there are liquidatable Vessels with an LTV above the protocol-set limit.
Is there a risk of loss?
While it’s unlikely, there are scenarios where Stability Providers may experience a loss. For instance, if a Vessel is liquidated above 100% LTV during a flash crash or due to an oracle failure, the collateral gain could be smaller than the reduction in the deposit.
What happens if the Stability Pool is empty?
In the event the Stability Pool is empty when liquidations occur, the system employs a secondary mechanism called redistribution. The debt and collateral from liquidated Vessels are distributed proportionally to all other existing Vessels based on their collateral amount.
We hope this article provides you with a clear understanding of the Stability Pool and its role within Gravita Protocol. For more details, please consult our newly published documentation.
As always, stay tuned for more insights as we continue unveiling Gravita!