⚖️Stability Pool

Participation in the Stability Pool

Stability Pool Participation in the Gas Bet Protocol

Users can participate in the Gas Bet Protocol's stability pool by depositing their Basefee derivative tokens. These pooled tokens act as a reserve to absorb losses from liquidation events and maintain the protocol's overall stability.

Depositing

• User Deposits: Users contribute their Basefee tokens to the stability pool, incentivized through mechanisms such as interest earnings, rewards in $GB tokens, or a share of the protocol's fees.

Risk Mitigation

• First Line of Defense: The stability pool serves as the protocol’s first line of defense against market volatility. It safeguards the system from potential insolvency caused by sharp declines in collateral value.

Handling Liquidations

When a borrower's collateral falls below the required collateralization ratio, a liquidation event is triggered, and the stability pool plays a crucial role in maintaining the protocol’s solvency.

• Collateral Liquidation: During liquidation, the protocol offsets the under-collateralized debt with assets from the stability pool instead of an immediate market sale. This helps secure a better price for the collateral.

• Debt Absorption: The stability pool absorbs the liquidated debt by receiving the collateral (e.g., wstETH). Although the pool's size decreases, it now holds the liquidated assets.

Incentives and Rewards

To encourage users to deposit their tokens into the stability pool, the protocol offers various rewards.

• Interest and Rewards: Participants can earn interest on their deposits, receive $GAS tokens, or share in the fees generated by the protocol.

• Liquidation Rewards: In some cases, participants may also receive a portion of the collateral from liquidated positions, distributed proportionally based on their stake in the pool.

Stability Pool Health and Risk Management

Maintaining the health of the stability pool is vital for the protocol's overall security.

• Health Monitoring: The protocol continuously monitors the pool’s size relative to the system’s outstanding debt. A too-small pool may struggle to manage large-scale liquidations.

• Recapitalization Strategies: If the stability pool becomes depleted during a market downturn, the protocol may implement recapitalization strategies. These could include adjusting interest rates to attract more deposits, offering additional incentives, or activating emergency measures via governance.

User Withdrawals

Participants in the stability pool can withdraw their contributions.

• Withdrawal Requests: Users can submit requests to withdraw their funds from the stability pool.

• Impact Management: The protocol may implement measures, such as dynamic fees, to manage the impact of large withdrawals on the stability pool’s health.