Liquidation is an important process in the RIME Protocol to ensure the system remains stable and well-collateralized. This guide will explain how liquidation works in the RIME Protocol and how you can protect your Trove from being liquidated.
Liquidation occurs when a Trove's collateral ratio falls below the minimum requirement. In this case, any liquidator can trigger the liquidation process to recover the outstanding RUSD debt. The liquidated collateral is then distributed to the Stability Pool and RIME Token stakers as a reward for maintaining the system's stability.
To protect your Trove from liquidation, it's essential to maintain a healthy collateral ratio at all times. Here are some steps you can take to prevent your Trove from being liquidated:
- Monitor your collateral ratio: Keep an eye on your Trove's collateral ratio and ensure it remains above the minimum requirement. You can use the RIME web app to track your Trove's health and receive notifications about potential risks.
- Add more collateral: If your collateral ratio is approaching the minimum requirement, consider depositing additional CFX to increase your collateral ratio and create a safety buffer.
- Repay RUSD debt: Another way to increase your collateral ratio is to repay some of your RUSD debt. This will decrease the amount of RUSD you owe and improve your Trove's health.
- Diversify your collateral: RIME Protocol allows you to use both CFX as collateral. By diversifying your collateral types, you can reduce the impact of market fluctuations on your Trove's health.
By following these steps, you can protect your Trove from liquidation and ensure a stable borrowing experience with the RIME Protocol. Remember to monitor your Trove's health and take action when necessary to maintain a healthy collateral ratio.