Recovery Mode

What is Recovery Mode?

Recovery Mode kicks in when the total LTV of one specific collateral type goes above the maximum LTV.

During Recovery Mode, TrenBoxes with an LTV of above Maximum System LTV can be liquidated.

Moreover, the system blocks borrower transactions that would further increase the LTV. New TrenUSD may only be issued by opening a new TrenBox with an LTV below the Recovery mode LTV.

What is the purpose of Recovery Mode?

The goal of Recovery Mode is to incentivize borrowers to behave in ways that promptly reduce the LTV back below the Maximum System LTV and to incentivize TrenUSD holders to replenish the Stability Pool. In recovery mode all fees are directed towards the stability pool.

Economically, Recovery Mode is designed to encourage collateral top-ups and debt repayments, and also itself acts as a self-negating deterrent: the possibility of it occurring actually guides the system away from ever reaching it. Recovery Mode is not a desirable state for the system.