Stability Pool

The Stability Pool is the first line of defense against undercollateralized debt. You deposit RD, the protocol uses it to absorb liquidations, and you receive collateral (usually at a discount to oracle price), interest fees(RD), and FEE token emissions in return.

One Stability Pool per branch. The WETH branch has its own pool, the wstETH branch has its own pool, etc. You choose which to deposit into.

You deposit RD into a branch's Stability Pool and earn three things: FEE emissions, a share of borrow interest in RD, and collateral seized from liquidations at a discount.

Overview

• You deposit RD into a branch Stability Pool
• Your RD deposit grows slowly, collecting fees from borrower interest.
• A liquidation hits the pool, the pool burns RD equal to the liquidated debt and receives the trove's collateral. Your deposit shrinks by your pro-rata share of the burned RD; your accumulated collateral gain grows by your pro-rata share of the seized collateral.
• The protocol seizes collateral at a discount to oracle price (typically the trove's ICR vs MCR gap), which is the depositor's economic upside.
• You also accrue FEE emissions continuously, tracked by the SpIssuance curve.

The branch router sends a slice of borrow interest straight to Stability-Pool depositors. That slice rises when the pool is thin (below its target share of branch debt) to pull deposits in, and falls when the pool is over-supplied. It is bounded to 10%–60% and rests at its 50% bias near target.

In a normal market, the discounted collateral plus FEE rewards more than compensate for the burned RD. In an extreme price drop where troves fall well below MCR before being liquidated, gains can be smaller and occasionally negative.

What you should know before depositing

• You can't choose which liquidation hits you. Every liquidation in your branch hits the pool pro-rata.
• Your balance changes silently. RD goes down, collateral gain goes up. No tx required.
• Your collateral gain is in the branch's collateral token. Deposits to the WETH pool give you WETH gains; deposits to the wstETH pool give you wstETH gains.
• You can't lose more than your deposit. The worst case is your entire deposit getting burned and the matching collateral gain being smaller than your initial RD (in nominal terms).

Depositing and withdrawing

You deposit RD (after approving the pool) and can withdraw part or all of it at any time; a withdrawal also pays out your accumulated collateral gain and FEE rewards. To claim rewards without touching your deposit, withdraw zero. Depositing through a registered front end tags your deposit — the front end's kickback rate sets how much of your FEE you keep — while a direct deposit keeps 100%. You can't change your tag later; switching tags means withdrawing and redepositing.

Developer reference: Earning for the deposit and withdraw calls and the front-end tag.

How rewards work

Each branch's Stability Pool has its own FEE emission stream, drawn from the global SP issuance budget of 31.5M FEE, split across pools by weight. You earn FEE in proportion to:

• How much RD you have in the pool.
• How long it's been there.

Your share is calculated whenever the pool's state is touched, so the math is exact. Front-end kickback is applied on top of your raw FEE earnings (see Front-end operators).

Depositors fund the pool with RD, and SP Issuance streams in FEE. When a trove falls under MCR, the pool burns RD to clear that debt and takes the trove's collateral in return (at a discount to oracle price). The trove closes; depositors' collateral gain and FEE both grow. No other troves are touched.

Pool earns a dynamic share of branch interest

Beyond FEE emissions and liquidation gains, the pool continuously adjusts the slice of the branch's borrow interest, routed in and folded straight into your RD balance. How big that slice is depends on how full the pool is relative to its target (25% of branch debt): when the pool is thin, the router sends more to pull deposits in; when it's over-supplied, it sends less. The share is bounded to 10%–60% and rests at a 50% bias near target.

The full split, including the deadband and where the rest of the interest goes, is in Fees.

Moving collateral gain back into a trove

If you have an open trove on the same branch, you can route your collateral gain straight into it instead of receiving it — gas-efficient if you were going to top up the trove with the gain anyway. See Earning for the call.

When to use the Stability Pool

• You're long the collateral. Depositing on the WETH pool gives you collateral exposure to ETH at a discount on every liquidation. Net long bias.
• You want the highest yield. A branch with a high current borrow rate routes more interest into its Stability Pool, so that pool's RD yield runs highest. Deposits are drawn to whichever branch is paying the most right now, which also puts loss-absorbing capital where the protocol needs it.
• You want FEE exposure. SP deposits are the largest organic FEE distribution path.

If you want pure RD exposure with no liquidation risk, don't use the Stability Pool, hold RD or LP it elsewhere.

Risks

• Price collapse during a liquidation cascade. If collateral drops fast enough that troves are liquidated well below MCR, the pool's seized collateral can be worth less than the RD it burns. Liquity v1 has had this happen during black-swan events.
• Branch shutdown. If your branch is shut down, FEE emissions for that pool stop accruing. Existing deposits and gains are still claimable. See Collateral shutdown.
• Collateral with weird semantics. Some collateral tokens have rebase or blacklist behavior that can interfere with SP accounting. See Risks.

Deep dive

• Front-end operators: how kickback works.
• Liquidation paths: exactly what happens when a liquidation hits the pool.
• Borrower view: same event, other side.