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Collateral Optimization

Decide which collateral carries your USDST debt, balancing borrowing capacity, liquidation distance and cost.

The Parameters That Matter

Each collateral asset in CDPEngine has its own settings. They differ by asset and can change, so this page doesn't list values. Read them in the app, or with CDPEngine.collateralParams(asset) if you're a developer.

Parameter Effect
Minimum CR Mints and withdrawals (while in debt) must keep CR at or above this. Sets your maximum borrowing.
Liquidation ratio The vault can be liquidated when CR falls below it. The app's Health Factor = CR ÷ liquidation ratio.
Stability fee Per-second compounding rate added to the vault's debt
Liquidation penalty Extra collateral, on top of the repaid debt, that a liquidator receives
Close factor Maximum share of a vault's debt one liquidation can repay
Debt floor Vault debt must be zero or at least this amount
Debt ceiling System-wide cap on USDST minted against the asset

On Borrow, each vault shows its collateral, debt, Health Factor and stability fee.

The Trade-offs, as Formulas

For one vault, with collateral value V at the oracle price:

Maximum debt              < V / minimum CR
Health Factor             = (V / debt) / liquidation ratio
Price drop to liquidation = 1 − 1 / Health Factor        (debt held constant)
Yearly cost               ≈ debt × stability fee rate     (compounding adds a little)

So for each asset you're choosing between:

  • Capacity: a lower minimum CR lets you mint more per dollar of collateral.
  • Distance to liquidation: set by the Health Factor you keep, not by the maximum you could mint.
  • Cost: the stability fee on the debt you place in that vault.
  • Price behavior: a volatile asset reaches a given price drop sooner than a stable one.

Why Vault Isolation Matters

Each asset's vault stands alone:

  • Collateral in one vault never backs debt in another.
  • A price drop in asset A can only liquidate vault A.
  • Assets that tend to move together will still fall together, so isolation doesn't create diversification by itself.
  • More vaults means more debt floors to meet and more positions to watch.

Lending pool: pooled collateral

The LendingPool contract uses a different, pooled model where all collateral backs one loan:

Health factor = Σ(collateral_i × price_i × liquidation threshold_i) / debt value
Borrow limit  = Σ(collateral_i × price_i × LTV_i) / USDST price

A loan there is liquidatable below health factor 1.0. A liquidator may repay up to 50% of the debt while the health factor is at least 0.95, and up to 100% below that. The liquidator receives collateral worth the repaid debt times the asset's liquidation bonus (a configured value between 100% and 125%). The lending pool's borrow screens are hidden in the current app; the Borrow page uses CDP vaults.

How the App Helps

The Mint form on Borrow already optimizes for cost when you mint a target amount with auto-allocation on:

  1. It sorts vaults by stability fee (lowest first), then by existing collateral, then by available headroom.
  2. It fills them in that order while keeping the target Health Factor you set with the slider.
  3. It skips allocations that would break a debt floor or debt ceiling.

Switch off auto-allocation to override this, for example to keep debt off an asset you expect to be volatile even if its fee is lower.

Optimization Moves

Move debt to a cheaper vault

  1. Mint USDST from vault B (lower stability fee), keeping its Health Factor at your target.
  2. Repay the same amount in vault A.
  3. Optionally Withdraw the collateral freed in vault A.

Cost: a few transactions at 0.01 USDST (or one voucher) each. Worth it only if the fee difference on the moved debt exceeds that over your holding period.

Add headroom where it's thinnest

If one vault's Health Factor is much lower than the others, Deposit more of that asset or repay that vault first. The aggregate figure won't warn you.

Change the collateral mix

Swap part of one collateral asset into another and move it between vaults. Follow the step order in Portfolio Rebalancing so no vault drops below its minimum CR.

When to Revisit

  • A vault's Health Factor drops below your own threshold (the app highlights values below 1.5)
  • Stability fees or other parameters change
  • An asset's debt ceiling is reached and new mints fail
  • Your view of an asset's risk changes

Every move costs transaction fees, swap fees and price impact, so don't rebalance for tiny improvements.

Next Steps

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