Using aUST as collateral questions

I have a question about liquidation when using aUST as a collateral.

Since the value of aUST will stay the same when borrowing mAssets or short farming, I’m thinking you can’t get liquidated. But I have the feeling I’m wrong so can someone explain? Will you get liquited if the price of your mAsset will go up when minting or short farming? Bit of a noob here trying to understand it all. Thanks in advance!

1 Like

As I understand it, you are still at risk for liquidation.

Suppose you mint $100 of some mAsset and its minimum collateral ratio is 150%. You decide to provide 200% and let the protocol hold $200 of aUST. Here’s a scenario:

Price of some mAsset goes up by $10. Borrowed or short mAsset is now $110. You’re collateral ratio is now about 182%. Next trading day, it goes up another $10. Now you’re collateral ratio is about 167%. If this continues below 150% without adding to your collateral debt position (CDP), you will be subjected to liquidation.

I hope that was clear. Let me know if you have another other questions!

Cheers

Thank you! I’m just gonna try it with a small amount. Best wat to learn I think

2 Likes

Hi Hiro,

I had planned to borrow a mAsset using my aUST. My understanding was that if the mAsset appreciates in value then the collateral required to keep the CDP would decrease.

I thought that if my mAsset appreciates in value enough I would be returned my aUST and still keep the mAsset.

Any clarity would be great.

Thanks

1 Like

No, that wouldn’t be how it works – You’re borrowing the mAsset which means you need to give it back. If the mAsset appreciates then more collateral is required.

See Hiro’s example: You borrow $100 of some mAsset and its minimum collateral ratio is 150%. You decide to provide 200% and let the protocol hold $200 of aUST. Here’s a scenario:

Price of some mAsset goes up by $10. Borrowed or short mAsset is now $110. You’re collateral ratio is now about 182%.

The borrow position actually needs more collateral, not less because you owe it an mAsset which is now more valuable. The fact that you have an mAsset in your wallet doesn’t change that.

When you borrow and hold an mAsset all you’ve done is take on liquidation risk. You need to do something (Long Farm or Sell) the mAsset to have a benefit

Hi,
I have another question about aUST used as collateral.
I know that aUST are UST stacked in Anchor with an APY near to 20%
They told me that during the period of collateralization in Mirror you still receive the 20% revenue from Anchor even if you won’t see anything at Anchor UI.

So I expect that if I put 100 aUST as collateral and I pay back the loan after 1 year, I will read a total deposit of 120 UST in Anchor at the end of the year.

I cannot understand how the accrued interests can be computed: when I give aUST as collateral, they are withdrawed from my wallet and when I pay back the loan aUST are credited again to my wallet. How can the protocol compute the correctly the time spent out of my wallet and provide to me the correct amount of interests?
Is it an information stored in those specific aUST I used as collateral or it is an information stored in my wallet? Is there a way to check the interests accrued by those aUST used as collateral?
I checked on Mirror and Anchor docs, but I didn’t find anything useful about this topic. I also tried to ask this question on Telegram… but I didn’t receive any answer.
Thanks in advance

aUST balances represent a depositor’s share in the Anchor money market. The exchange rate with the underlying stablecoin UST, the aUST exchange rate , increases as deposits accrue interest, appreciating the value of aUST.

The system does not compute anything while you’re holding, your aUST is a ticket to a pool of UST, as time passes each ticket (1 aUST) can claim a bigger amount of the UST pool based on the APY. So if you mint something with 1 aUST all mirror needs to know is you get that 1 aUST back when you return it, but during that time 1 aUST appreciated against UST and you can now claim more of it.

1 Like

ok, thank for your explanations. Now it is clear to me.
Have a nice day!

1 Like