Auction Pools and Liquidations
Last updated
Last updated
What are Auction Pools?
Auction pools in AlphBanX are an important part of the platform, allowing users to deposit ABD tokens and participate in auctions while earning yield from borrowers. Here's a breakdown of how they work:
Deposit ABD Tokens: Users can deposit ABD tokens into designated earn pools to participate in the auction process.
Earning Borrowing Fees: Users earn borrowing fees from the loans associated with these pools, providing a continuous source of passive income.
Discount Tiers: Earn pools are categorized into four tiers based on discount rates: 5%, 10%, 15%, and 20%, which apply to auctioned loans. Only the lowest discount pool with sufficient ABD balance is used to repay each liquidated loan.
Repayment of Auctioned Loans: The ABD tokens deposited in these pools are used to repay loans that are auctioned, supporting under-collateralized loan liquidations.
Providing Liquidity and Demand: These pools ensure sufficient liquidity is available for the auction process, maintaining the platform’s operational efficiency and sustainability.
Reward Distribution: Rewards are distributed to users based on their participation and contributions to the pools, incentivizing long-term engagement.
Support for Platform Stability: Earn pools play a crucial role in supporting the stability and liquidity of AlphBanX, ensuring a well-functioning auction and lending system.
Performance Monitoring: Users can easily track the performance of their chosen earn pools via the platform’s interface, enabling them to make informed decisions.
In AlphBanX, auction pools function as risk-free short positions on under-collateralized loans. The auction and liquidation process is fully automated; users provide liquidity passively through ABD pools without manual bidding.
Risk-Free Short Positions: Auction pools offer a unique advantage compared to traditional short positions. If the value of Alephium increases, users can increase their debt, which increases the yield for liquidity providers in the auction pool. Unlike normal short positions, where an increase in asset value results in a loss, this mechanism enhances returns for pool participants.
Multi-Tier Profit Arbitrage: If Alephium's price drops and users get liquidated, auction participants can benefit from arbitrage across four discount pools (5%, 10%, 15%, and 20%). This allows users to capture profits at each discount tier, ensuring benefits regardless of whether prices rise or fall.
Bidding: Bids are placed in one of four discount pools (5%, 10%, 15%, 20%), and are executed based on the creation time and pool prioritization. Pools with lower discounts have higher priority. If a lower discount pool lacks enough ABD, the protocol will attempt the next available tier.
Trigger: Loans enter the auction process if their collateral ratio (CR) falls below 200%.
Collateral Sale: Collateral is sold at a discount based on the active pool to repay the loan.
Rewards: Users earn rewards from successful bids through discounted purchases of collateral.
The auction process ensures timely liquidation of under-collateralized loans, maintaining healthy collateral ratios across the platform. AlphBanX provides seamless participation for users in the auction process, optimizing liquidity flow.
In essence, AlphBanX auctions create a win-win scenario for liquidity providers, offering increased yields when prices rise and potential arbitrage profits (up to 20%) when prices fall, across four discount pools.
The amount of ALPH you receive for participating in an auction pool is based on the discount tier you selected.
For example, in a 20% discount pool, depositing 1000 ABD will result in 1200 ALPH returned upon successful liquidation (1000 × 1.2 = 1200).
Note:
The current protocol calculation uses ALPH returned = ABD deposited × (1 + discount).
This means, for a 20% pool, you receive 20% more ALPH than ABD provided.
Anyone can initiate the liquidation of a Loan, when its collateral ratio drops below the minimum of 200%.
Depositing ABD into Earn pools offers several benefits:
Earn Rewards: By participating in Earn pools, you earn a share of the borrowing fees, providing a steady income. Note that ABX rewards are vested linearly over 12 months.
Arbitrage Opportunities: Earn pools are categorized by discount values, offering potential profits from arbitraging liquidated collateral up to 20% discount.
