Acala Stablecoin

Key Parameters

The following are essential risks parameters and requirements of minting Acala Dollar, note that each collateral type would have its own unique risk profiles:

Collateral Ratio

The collateral ratio is the ratio between minted Acala Dollar and the dollar value of collateral asset deposited. Each Acala Dollar is backed by collateral assets over the value of a dollar, so called over-collateralization.
Each collateral asset has its own Liquidation ratio, which is the minimum collateral ratio required before a loan will be automatically liquidated (where collateral assets will be sold for Acala Dollar to payback the loan).
Each collateral asset has its own Required Collateral Ratio, which is the minimum collateral ratio required to mint more Acala Dollar. It is a higher ratio than the Liquidation ratio, serving as a safety buffer for liquidation.
Vault/Loan owner will need to maintain the safety of the loan by keeping the collateral ratio above the Liquidation Ratio.
  • Repay Acala Dollar can reduce outstanding debt, and with the same amount of collateral, it will increase the collateral ratio
  • Deposit more collateral: will increase the amount of asset backing Acala Dollar loan, and will increase collateral ratio
For example: 100 DOT valued at $2,000 is deposited as collateral to mint 500 Acala Dollar.
  • Collateral ratio = $2,000 / 500 = 400%
  • DOT price can fall to $10/DOT to maintain the liquidation ratio at 200%
  • User will need to payback some Acala Dollar, or deposit more DOT as collateral to prevent liquidation

Current Ratio

User's current collateral ratio

Required Collateral Ratio

Required collateral ratio is the collateral ratio required to mint more Acala Dollar. If your Current ratio is below required collateral ratio, you can no longer take out more loans. The Required Collateral Ratio is generally above the Liquidation Ratio, serving as a safety buffer. If your loan's current ratio hits the Liquidation Ratio, the loan will be automatically liquidated. The Required Collateral Ratio prevents further Acala Dollar minting therefore prevents current ratio to drop further below.
For example, liquidation ratio is 200% or 2.0, Required Collateral Ratio is 250% or 2.5
  • when Acala Dollar first be minted, it's collateral ratio will be at least 250%
  • if collateral asset price fluctuates right after minting, there is a 50% price buffer for user to react before liquidation.

Stability Fee

As you mint Acala Dollar, a stability fee (payable in Acala Dollar) will begin to accrue a variable rate fee on the amount of Acala Dollar minted. When you close a Acala Dollar vault/loan, you will need to payback the Acala Dollar minted as well as stability fees accrued.
Each reserve asset/collateral asset has its own stability fee depending on the risk profile and market conditions. The stability fee is one of the risk parameters that can be set and adjusted via on-chain governance (specifically via the Financial Council).
The rate rate is calculated each block and accumulated to the debit account.

Liquidation Ratio

If the current ratio is below the Liquidation Ratio, then the vault is deemed unsafe, the collateral will then be liquidated (to be sold or auctioned to payback the Acala Dollar outstanding). The price fluctuation of underlying collateral assets affects the risk profile of the minted Acala Dollar, hence adjusting the liquidation ratio to a degree creates a stability shell of the stablecoin.

Liquidation Price

If a collateral asset's price drops below the Liquidation Price, then the vault is deemed unsafe, collaterals in the vault will be liquidated. You can calculate the Liquidation Price from the liquidation ratio, current ratio and the collateral price.
  • For example, if current collateral DOT price is $20
  • Current ratio = 250% or 2.5
  • Liquidation ratio = 200% or 2.0
  • Liquidation Price = $20 * 200% / 250% = $16
  • If DOT drops below $16, your vault will be liquidated.

Liquidation Penalty

Liquidation Penalty is charged when liquidation is triggered. It is a percentage applied on the outstanding debt. When liquidation occurs, the Liquidation Penalty + outstanding Acala Dollar are the target amount for collaterals to be sold/auctioned for to payback.
The liquidation penalty is a disincentive for users to leave a position in danger, hence provides additional safeguard and stability of the stablecoin.

Debt Ceiling

Debt Ceiling is the maximum amount of Acala Dollar that can be minted from a particular collateral asset.
The above parameters can be looked up on-chain via Polkadot WebApp - select chain (Acala or Karura), then navigate to Developer - ChainState - Storage
Then select the collateral token

Minimum Acala Dollar in Vault

Minimum Acala Dollar in Vault is the minimum loan amount. For example if Minimum Acala Dollar in Vault = 20, then you are required to mint at least 20 Acala Dollar to open a vault.
This value can be looked up on-chain via Polkadot WebApp - select chain (Acala or Karura), then navigate to Developer - ChainState - Constants

Oracle Prices

The protocol relies on real-time market price for the collaterals to assess risks and trigger liquidations if thresholds are met. These market prices come from Acala Oracle via the Open Oracle Gateway.
Last modified 9mo ago