# Redistribution

## Redistribution Overview 

Redistribution occurs when vaults are uncollateralized but the Stability Pool has been depleted. When redistribution occurs debt and collateral from undercollateralized vaults are redistributed across all vaults. This is a rare and unexpected protocol state.

## How Redistribution works

* Occurs when a vault is under-collateralized and ready to liquidate but  the Stability Pool is empty. 
* The uncovered debt and collateral from the liquidated vault are added to global protocol accumulators. Each remaining vault's share of this redistributed debt and collateral is then calculated based on its proportion of global collateral when needed affecting its balances indirectly.
* Vaults periodically accrue their share of protocol debt and collateral. This can cause CR to decrease but will also produce a net increase in the USD value of the vault.  

## Redistribution example

Here are the starting conditions. For simplicity sBTC collateral value is expressed in USD terms: 

<table><thead><tr><th>Vaults</th><th width="169">Debt</th><th width="164">Collateral</th><th>CR</th><th>Net Value</th></tr></thead><tbody><tr><td><strong>Bob</strong></td><td>4000</td><td>6000</td><td>150%</td><td>2000</td></tr><tr><td><strong>Alice</strong></td><td>2000</td><td>5000</td><td>250%</td><td>3000</td></tr><tr><td><strong>Charlie</strong></td><td>3000</td><td>3300</td><td>110%</td><td>300</td></tr></tbody></table>

The Stability Pool is depleted and so Charlie's vault will be redistributed proportionate to the other vault's share of global collateral.&#x20;

* Bob's vault contains \~54% (5000 / 11000) of global collateral&#x20;
* Alice's vault contains \~45% (6000 / 11000) of global collateral

| Redistribution | Debt added                               | Collateral added              |
| -------------- | ---------------------------------------- | ----------------------------- |
| **Bob**        | 3000 \* (5000 / 11000) = 1363.6363636364 | 3300 \* (5000 / 11000) = 1800 |
| **Alice**      | 3000 \* (6000 / 11000) = 1636.3636363636 | 3300 \* (6000 / 11000) = 1500 |

After Redistribution is complete:&#x20;

| Vaults      | Debt     | Collateral | Old CR | New CR  | Old Net | New Net   |
| ----------- | -------- | ---------- | ------ | ------- | ------- | --------- |
| **Bob**     | 5,636.36 | 7,800      | 150%   | 137.92% | 2000    | 2,163.638 |
| **Alice**   | 3,363.64 | 6,500      | 250%   | 193.24% | 3000    | 3,136.36  |
| **Charlie** | 0        | 0          | 110%   | --      | 300     | --        |

Notice that Charlie's bad debt has been removed and Alice and Bob have experienced a decrease in Collateral Ratio and an increase in net dollar value.&#x20;

## My collateral and debt went up without my action?

This is the result of redistribution. If vaults are liquidated and the Stability Pool is empty every borrower will receive a portion of the liquidated collateral and debt as part of a redistribution process.&#x20;


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