11 times, increasing their exposure to price changes. This is possible because TSD can be borrowed against AVAX, sold on the open market to purchase more AVAX — rinse and repeat.*
110%. A minimum debt of
2,000 TSDis required.
0.5%under normal operation. The fee is
0%during Recovery Mode. A
200 TSDLiquidation Reserve charge will be applied as well, but returned to you upon repayment of debt.
baseRate. The fee rate is confined to a range between
5%and is multiplied by the amount of liquidity drawn by the borrower.
0.5%and the borrower draws
4,000 TSDfrom his open Trove. Being charged a fee of
18.91 TSD, the borrower will obtain
3,781.09 TSDafter the Liquidation Reserve and issuance fee are deducted.
$3,000and you decide to deposit
10 AVAX. If you borrow
10,000 TSD, then the collateral ratio for your Trove would be
25,000 TSDthat would put your ratio at
110%. So if your Trove has a debt
10,000 TSD, you would need at least
$11,000worth of AVAX posted as collateral to avoid being liquidated.
9.09% (= 100% * 10 / 110)of your collateral’s Dollar value.
200 TSDis set aside as a way to compensate gas costs for the transaction sender in the event your Trove being liquidated. The Liquidation Reserve is fully refundable if your Trove is not liquidated, and is given back to you when you close your Trove by repaying your debt. The Liquidation Reserve counts as debt and is taken into account for the calculation of a Trove's collateral ratio, slightly increasing the actual collateral requirements.
110%). If at the time of redemption you have the Trove with the lowest ratio, you will give up some of your collateral, but your debt will be reduced accordingly.
2 AVAXcollateralized and a debt of
3,200 TSD. The current price of AVAX is
$2,000. This puts your collateral ratio (CR) at
125% (= 100% * (2 * 2,000) / 3,200). Let’s imagine this is the lowest CR in the Teddy Cash system and look at two examples of a partial redemption and a full redemption:
0.6 AVAXand thus repays
1,200 TSDof your debt, reducing it from
2,000 TSD. In return,
$1,200, is transferred from your Trove to the redeemer. Your collateral goes down from
2 to 1.4 AVAX, while your collateral ratio goes up from
140% (= 100% * (1.4 * 2,000) / 2,000).
3 AVAX. Given that the redeemed amount is larger than your debt minus
200 TSD(set aside as a Liquidation Reserve), your debt of
3,200 TSDis entirely cleared and your collateral gets reduced by
$3,000of AVAX, leaving you with a collateral of
0.5 AVAX (= 2 - 3,000 / 2,000).
AVAXand use the latter to top up the collateral of your Trove. That allows you to draw and sell more TSD, and by repeating the process you can reach the desired leverage ratio.
1 TSD = $1), the maximum achievable leverage ratio is
11x. It is given by the formula: