Gas compensation

In Apollon, maximizing liquidation throughput is crucial to promptly handle undercollateralized Troves. Liquidators, who may also hold Stability Pool deposits, play a pivotal role by profiting from these liquidations.

However, substantial gas costs pose a challenge. High gas costs for public liquidation functions may deter liquidators, resulting in prolonged undercollateralized Trove states.

To incentivize timely liquidations, the protocol directly compensates liquidators for their gas costs, ensuring they can break even or profit even during periods of high gas prices. Gas compensation consists of both aUSD and collateral:

• Collateral: Taken from the liquidated Trove.

• aUSD: Provided from a Liquidation Reserve funded when a borrower first issues debt. Each liquidation transaction draws from this reserve to compensate the liquidator. If multiple Troves are liquidated in a single transaction, contributions from each Trove accumulate towards the total compensation.

Gas compensation per liquidated Trove follows this formula: 5 aUSD + 0.5% of the Trove's collateral.

Gas Compensation Schedule

• Opening a Vault/Trove: A borrower issues an additional 5 aUSD debt to a dedicated contract, the "gas pool," for gas compensation.

• Closing an Active Trove: Upon Trove closure, 5 aUSD is burned from the gas pool, and the corresponding debt on the Trove is canceled, refunding the gas compensation.

Gas Compensation and Redemptions

• Redemptions: When a Trove is redeemed, it's against the debt minus the initial 5 aUSD. This ensures that the gas compensation remains intact for liquidators.

Mixed Liquidations: Offset and Redistribution

When a Trove is liquidated into the Stability Pool:

• Offset: If the Apollon debt matches or exceeds the Stability Pool's holdings, the debt cancels out, and the corresponding Apollon are burned.

• Pure Offset: If the Stability Pool holds more Apollon than the Trove's debt, the entire debt cancels, and the Trove's collateral is shared among depositors.

In cases where the Stability Pool holds fewer Apollon than the Trove's debt, a fraction of the debt is offset using the Pool's Apollon, and a proportionate fraction of the Trove's collateral goes to Stability Providers. The remaining debt and collateral redistribute to active Troves—a mixed offset and redistribution.

Redistributions: Separated by Collateral

Redistributions occur per collateral token type:

• For instance, a Trove with 30% BTC and 70% USDT collateral redistributes 30% of its Apollon debts to other BTC Troves and 70% to USDT Troves.

If the last Trove of a collateral type is liquidated, its tokens are marked as unassigned in the Storage Pool. They can be claimed by any borrower using the claimUnassignedAssets function, transferring the collateral and Apollon debts to their Trove.