Analyzing Preon’s Stability Pool
Surfing the First Wave of Liquidations
Welcome back, Preonauts.
In the vast ocean of DeFi, liquidity is king. And sometimes, just like high tide, liquidations are a natural and necessary phenomenon. Today, we at Preon would like to present our findings after analyzing the Stability Pool following our first wave of liquidations, an important event for our platform.
Riding the Wave: What Are Liquidations?
Liquidations are an essential part of Preon’s mechanisms. A user’s position becomes eligible for liquidation when a user’s position Loan-to-Value ratio (LTV) exceeds the maximum LTV of the Nebula Vault they are using. Since $STAR is over-collateralized, a position LTV that exceeds the vault’s maximum LTV essentially means that the user’s deposit no longer sufficiently over-collateralizes the $STAR they have borrowed; therefore, to pay back the remaining debt (and to maintain the $STAR peg), the user’s collateral is seized and their position closed for them. In that way, liquidations can be thought of as safety valves, designed to maintain the health and stability of the $STAR peg, and Preon as a whole.
Our platform is designed to smoothly and elegantly handle these liquidations. They ensure the $STAR peg remains robust and resilient, even in the most tumultuous market conditions. It is also worth noting that even though Preon is designed to make opening a collateralized debt position as stable, smooth and accessible as possible, there is still an inherent risk to using DeFi solutions (and any financial investment in general) that is worth considering when depositing.
The First Wave: A Flawless Execution
Over the past few days, Preon has experienced its first few liquidations. And we are excited to report that everything worked flawlessly, with every mechanism executed with precision and grace.
These liquidations have been carried out by Gelato, a decentralized automation network that allows developers to automate and relay augmented smart contracts. Our liquidation process ensures fairness, transparency, and efficiency, reinforcing our commitment to our users. In addition, liquidated users’ $STAR was not affected by the closing of their positions, and their $STAR tokens were still accessible in their wallets.
Revenue, Stability & the Peg
Now, let’s take a look at some figures. The liquidations generated $220 in revenue, which will go to our lockers. This revenue is accumulated from the $20 $STAR and 0.5% collateral liquidation fee that typically goes to the liquidator. However, since we are using Gelato, these fees flow to the lockers instead, providing extra incentive for our users.
Despite the market turmoil during the last few days, the $STAR peg maintained its strength at $1 without any issues: a testament to the stability and resilience of Preon’s mechanisms.
Furthermore, a total of $6180 has been liquidated and went to the protocol’s Stability Pool. This pool acts as a collateral hub, ensuring the continued over-collateralization of the $STAR token. In addition, those who deposited $STAR into the Stability Pool received a portion of the amount liquidated as incentive for their stablecoin deposit — a true healthy feedback loop.
Navigating the Waves of DeFi
Our analysis of these first liquidations marks an important milestone for Preon. They demonstrate the robustness of our platform, and confirm our commitment to transparency and fairness.
As we continue to navigate the waves of the DeFi ocean, we remain committed to providing our users with a safe, efficient, and rewarding platform. We understand that liquidations, like high tides, are a necessary part of the DeFi landscape. And with our innovative mechanisms, we are well-equipped to make these tides as navigable and reassuring as possible for our users.
All in all, Preonauts can rest assured that Preon is here to help its users catch the perfect wave and optimize their DeFi experience. Following our first wave of liquidations, we are more confident than ever in our continued efforts to navigate the exciting and dynamic world of DeFi, and are ready to help our users in making the DeFi world their oyster.
So join us as we ride the next wave of DeFi innovation. With Preon, the surf’s always up.
Thank you for reading, Preonauts. Stay tuned as we continue our voyage through the $STARs.
