Collateral

Collateral in Based

The BSD borrowed in vaults is backed by the value of Bitcoin (sBTC). Based is designed to ensure that global collateral always exceeds global debt. The minimum collateral ratio of 110% (MCR or collateral/debt), is also commonly known as 90.9% loan to value ratio (LTV), is the lowest ratio of debt to collateral that will not trigger a liquidation. All vaults must exceed 110% or they will be liquidated.

Liquidations

Vaults that fall under the minimum collateral ratio of 110% will be liquidated. Under normal conditions, the debt of the vault will be absorbed by the Stability Pool and its collateral distributed among Stability Providers.

What happens if my vault is liquidated?

When the value of your sBTC falls below 110% of the value of your borrowed BSD you will no longer be able to retrieve your collateral by repaying your debt. Your vault will be liquidated by the Stability pool or redistribution. You will still have the BSD, and because your collateral is ~110% your net loss in immediate dollar terms would be ~9.09% (100% * 10 / 110).