Collateral
Auro Finance supports a wide range of collateral options, including Layer 1 tokens and Liquid Staking Tokens (LSTs):
APT
stAPT
amAPT
sthAPT (coming soon)
This flexibility allows users to leverage various assets based on their investment strategies and risk preferences. By offering multiple collateral types, Auro Finance enhances accessibility and capital efficiency, ensuring users can optimize their financial strategies.
Liquid Staking Tokens (LSTs)
LSTs represent staked assets in a Proof-of-Stake (PoS) network while maintaining liquidity. Traditionally, staked assets are locked for a set period, but liquid staking enables users to: ✅ Stake assets & earn rewards while keeping them tradable ✅ Use staked tokens in DeFi applications for lending, borrowing, and yield farming ✅ Maintain security & decentralization in PoS networks
LSTs are usually issued on a 1:1 basis with staked assets and continue earning rewards like their original counterparts, allowing users to maximize their capital efficiency.
Loan Liquidation
To ensure that USDA remains fully backed by APT collateral, Auro Finance employs an automated liquidation mechanism:
Liquidation occurs if the collateral’s value drops below the borrowed amount.
The borrowed USDA is auctioned (Dutch auction) to cover the debt.
Liquidators receive gas compensation for triggering liquidations, and anyone can participate, including the borrower.
Once the auction is complete, sold collateral is distributed to liquidators, and any remaining balance is returned to the borrower's wallet.
Auro Finance ensures a secure and efficient liquidation process, protecting the stability of USDA while offering users an opportunity to participate in the system. For a deeper dive, check out our detailed liquidation model.
Liquidation model
Variable/Step
Value/Formula
Price of 1 unit of collateral
$2
Collateral ratio
66%
Collateral price based on collateral ratio
$1.32
Assume User deposit 10 units collateral
10 × $2 = $20
Borrow limit
user_deposit × collateral_ratio = $20 × 0.66 = $13.2
Assume User borrows $13.2 of USDA
13.2 USDA
Assume Price of 1 unit of collateral decreases to
$1.8
Collateral unit price with safety margin
current_collateral_unit_price × collateral_ratio = $1.8 × 0.66 = $1.188
Current worth of collateral with safety margin
price_of_collateral × amount_of_collateral = $1.188 × 10 = $11.88
Positive diff puts user under liquidation line
borrowed_amount - current_total_collateral_borrow_limit = 13.2 - 11.88 = $1.32
Amount of collateral that goes to Dutch auction
10
Liquidation penalty (fixed by Auro Finance governance)
10% of the debt
Debt to cover in the auction
borrowed_amount × liquidation_penalty = 13.2 × 1.10 = $14.52
buf (percentage similar to liquidation penalty, fixed by Auro Finance governance)
2%
Starting auction price (top)
current_collateral_unit_price × buf = $1.8 × 1.02 = $1.836
Somebody triggers auction and gets tip + chip
Tip is described later.
Auction starts and price gradually decreases
Liquidators can participate to buy customized amounts of liquidated collateral.
tau (time until price is 0; fixed by Auro Finance governance)
e.g., 3600
dur (time elapsed since auction start)
Time in seconds elapsed since the auction start, e.g., 600
Linear decrease of price (subject to disruption by event below)
top × ((tau - dur) / tau) = 1.836 × ((3600 - 600) / 3600) = $1.53
Pause auction because of one of two conditions: — tail (specific amount of time elapsed; fixed by Auro Finance governance) OR — cusp (% of price drop; 40% start auction price; fixed by Auro Finance governance)
either requirement is met, the auction will be restarted
Wait until someone restarts auction
Tip (fixed fee; set by governance)
$5 USDA
Chip (dynamic fee; set by governance)
$0
Restarter gets tip + chip as a reward
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