Vault Liquidators

In EpsiLoan Protocol, the ability to liquidate Vaults is open to any participant who observes that a Vault has fallen below the Minimum Collateral Any participant in the EpsiLoan Protocol, including users and stakeholders, can initiate the liquidation process for a Vault once it drops below the Minimum Collateral Ratio of 120%. This open-access approach ensures that the protocol remains decentralized and allows for active participation from all members of the community in maintaining system stability.

As an incentive for initiating the liquidation process, the individual who triggers the liquidation receives a gas compensation (200 yUSD) along with a reward. The gas compensation is provided to cover the transaction costs associated with executing the liquidation. Additionally, the initiator receives a reward equivalent to 1% of the collateral held within the liquidated Vault, ensuring that they are incentivized to actively monitor and enforce the Minimum Collateral Ratio across the protocol.

By allowing any participant to initiate liquidations and providing rewards for this service, EpsiLoan encourages active engagement and participation in maintaining system stability and ensuring the integrity of the protocol. This decentralized approach empowers users and stakeholders to contribute to the health and resilience of the EpsiLoan ecosystem while incentivizing responsible behavior and risk management practices.

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Compensation for Liquidating a Vault: Gas Compensation Formula

When you initiate the liquidation of a Vault within the EpsiLoan Protocol, you are compensated for the associated gas costs through a predefined formula. This compensation ensures that liquidations remain profitable, even during periods of high gas prices. Let's explore how you are compensated for liquidating a Vault:

Gas Compensation Formula: The gas compensation you receive is determined by the following formula:

Gas Compensation = 200 yUSD + 1% of the Vault's collateral (in LRT)

This formula consists of two components:

• Fixed Gas Compensation: You receive a fixed amount of 200 yUSD to cover the gas costs incurred during the liquidation process. This fixed component ensures that you are adequately compensated for the transaction fees associated with executing the liquidation.

• Variable Compensation: In addition to the fixed amount, you receive a variable compensation equivalent to 1% of the collateral held within the liquidated Vault, denominated in Liquid Restaking Tokens (LRT). This variable component serves as an additional incentive for initiating liquidations and is funded by the collateral obtained from the liquidated Vault.

Source of Compensation: The fixed gas compensation of 200 yUSD is funded by a Liquidation Reserve established within the EpsiLoan Protocol. This reserve ensures that initiators are compensated for gas costs, regardless of fluctuations in gas prices. The variable compensation, representing 1% of the Vault's collateral in LRT, is sourced from the liquidated collateral. This component slightly reduces the liquidation gains for Stability Providers, as a portion of the collateral is allocated to compensate the initiator.

By offering compensation for liquidating Vaults, EpsiLoan incentivizes active participation in maintaining system stability and enforcing the Minimum Collateral Ratio. This compensation mechanism ensures that initiators are adequately rewarded for their role in preserving the integrity and resilience of the protocol, contributing to a robust and sustainable decentralized finance ecosystem.