🚑Recovery mode

Recovery Mode in Moonyield

Recovery Mode is a safety mechanism activated when the system’s total collateralization ratio (TCR) falls below 200%, indicating that the protocol is at risk of becoming under-collateralized. It is designed to protect the stability of MUSD and ensure the system remains solvent.

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Key Features of Recovery Mode

Priority of Collateral Health:

• Borrowing is restricted to ensure new loans improve the system's collateralization.

• Only Vaults that bring the TCR closer to 200% are allowed to open or adjust.

Liquidation Adjustments:

• Vaults with a collateral ratio below 200% are liquidated first, regardless of their size.

• This incentivizes borrowers to maintain high collateral ratios, even during periods of market stress.

No Issuance of New Risk:

• Borrowers are encouraged to strengthen their positions by increasing collateral or repaying debt.

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Impact on Users

• Borrowers: Must ensure their Vaults are over-collateralized (above 200%) to avoid liquidation.

• Stability Pool Depositors: Benefit from increased rewards, as liquidations transfer collateral to the Stability Pool.

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Recovery Mode helps maintain MUSD's stability and protects the protocol during volatile or adverse market conditions.