Recovery Mode

This page details Recovery Mode in ZeroLend

Recovery Mode is a critical safety feature within the ZeroLend protocol, activated to safeguard the system's financial stability. This mode is triggered when the overall Global Total Collateral Ratio (GTCR) across the protocol drops below the 150% threshold. Its primary function is to prevent further erosion of the system's collateral base, ensuring the protocol remains robust against market volatility and fluctuations.

Recovery Mode is triggered when the Global Total Collateral Ratio (GTCR) falls below 150%.

GTCR represents the ratio of the total value of all collateral in the protocol to the total outstanding debt, measured in ONEZ.

Recovery Mode is structured to promote additional collateral deposits and debt repayments.

Why Recovery Mode?

Recovery Mode aims to quickly restore the GTCR above 150%, encouraging positive contributions to the Stability Pool and strategic debt repayments. To facilitate this, minting fees are eliminated, while redemption fees remain unchanged. Liquidation rules are adjusted to allow borrowers to recover excess collateral, minimizing potential losses.

Liquidation Policies During Recovery Mode

Under Recovery Mode, vaults with a collateral ratio below the system-wide GTCR are at risk of liquidation. The protocol pauses transactions that could worsen the GTCR, focusing on stabilizing the system's financial health.

Restrictions on ONEZ Issuance

The creation of the new ONEZ is tightly controlled during Recovery Mode. Only actions that directly improve the collateral ratio of existing vaults or involve opening new vaults with a collateral ratio above 150% are permitted, promoting efforts to restore the GTCR.