Debt Recovery
Last updated
Last updated
In the Fused Trade Ledger (FTL), debt recovery is managed exclusively through an auto-liquidation mechanism, which is triggered when a debt reaches its expiry.
when a debt expires, it can be blacklisted by any user, and the collateral is absorbed into the liquidity pool. The user who blacklists an expired debt, referred to as the liquidator, earns Nitro Points as a reward, which can be converted to the protocol’s token.
Debt rollover is a mechanism that allows borrowers to extend their debt’s maturity date to avoid liquidation. By paying a minimal rollover fee, the borrower resets the debt’s expiry countdown to the default term of 7 days.
Due to market price fluctuations, debts may transition through several states before reaching expiry. These statuses influence repayment and rollover eligibility:
Active Debt:
A debt outside the buffer range is considered active. Active debts can be repaid or rolled over without restrictions.
Greyed debt
If market price shifts bring the debt within the buffer range, it becomes “greyed.” Greyed debts cannot be rolled over, but they can still be repaid.
Buffer Range: , indicating the range (bins) on either side of the active bin functioning as a safeguard to preserve liquidity for swaps and prevent liquidity depletion due to borrowing activities
Inactive debt
A debt is considered inactive if price movements cause a reversal, where a debt borrowed below the active price crosses above, or vice versa. Inactive debts cannot be repaid or rolled over, but the expiry countdown continues.
Trigger Points:
debt borrowed below the active price become inactive when: .
debts borrowed above the active price become inactive when: .
