ARTHis redeemed, the collateral provided to the redeemer is allocated from loans with the lowest collateral ratio, even if it is above the minimum collateral ratio
200 ETHcollateralized with a debt of
3,200 ARTHand the current price of ETH is
(= 100% * (20 * 200) / 3,200). Let’s imagine this is the lowest CR in the protocol and look at two examples of a partial redemption and a full redemption:
60 ETHand thus repays
1,200 ARTHof your debt, reducing it from
1,200 $GMU, is transferred from your loan to the redeemer. Your collateral goes down from
200 ETH to 140 ETH, while your collateral ratio goes up from
140% (= 100% * (20 * 140) / 2,000).
ETHis more than the amount of debt a loan has. In such situations the borrower's loan is completely closed (as it's debt is paid off by the redeemer's
ARTH), the equivalent amount of
ETHis sent back to the redeemer and the borrower's collateral (
ETH) exposure is reduced by the amount redeemed.
300 ETH. Given that the redeemed amount is larger than your debt minus
50 ARTH(set aside as a Liquidation Reserve), your debt of
3,200 ARTHis entirely cleared and your collateral gets reduced by
3,150 $GMUof ETH, leaving you with collateral of
40 ETH (= 200 - 3,200 / 20).
(baseRate + 0.5%) * collateral redeemed
baseRatestate variable, which is dynamically updated. The
baseRateincreases with each redemption, and decays according to the time passed since the last fee event - i.e. the last redemption or issuance of ARTH.
baseRateis decayed based on time passed since the last fee event
baseRateis incremented by an amount proportional to the fraction of the total ARTH supply that was redeemed
(baseRate + 0.5%) * ETHdrawn
ARTHholder will have to pay a fee which is a percentage of the value being liquidated in
ARTHholders from redeeming their bonds but rather used to control the speed at which they do so.