News & Updates

Preventing liquidation by adding collateral to loans on Sovryn

May 12, 2022
min read

Versión en español

You can now add collateral to your loan when you borrow on Sovryn!

The intended release date for this feature was to be next week, but in light of recent and ongoing market conditions, we thought it pragmatic to expedite it in the current development cycle and ship it early.

At times of uncertainty like these in the markets, one of your top priorities should be to preserve capital. In the past 24 hours, the price of bitcoin has dropped well below the strong psychological support level of $30,000. 

Why add collateral?

The funds you deposit to the protocol when taking out a loan is called collateral. The value of collateral against the value of the loan is called a collateral ratio. Currently, an initial collateral ratio of 150% is required when borrowing on the protocol. When the value of the deposited collateral falls below 115%, a gradual liquidation of the collateral is initiated, meaning you must maintain a minimum of 1.15x the loan amount in collateral.

Liquidation is the point at which the collateral you put down is sold to cover the risk of defaulting on the loan. This gradual liquidation of collateral can result in the complete depletion of the borrower’s deposited funds, which is never a pleasant experience.

Preventing liquidation

On the Sovryn protocol, you now have the ability to deposit more collateral to your loan. By doing this, you will increase the collateral ratio to a healthier level and reduce the risk of liquidation. 

You will notice a new ‘Add Collateral’ button related to open loans in the Active tab of the 'My Debts' section, on the Borrow page. 

In the ‘Add Collateral’ popup, you will be able to see your current collateral balance, your collateral ratio displayed as a percentage, and the liquidation price. 

You can enter the amount of collateral you would like to add to the loan, which will give you a new collateral balance, collateral ratio and liquidation price. You will also have the option of selecting from predetermined percentage amounts based on the balance of your wallet.

Once you have specified the amount of collateral you would like to add, you will be prompted to review and approve the transaction with your wallet. And, hey presto, you will have managed your risk in these rough seas. 


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Other dev updates

  • ‘rBTC’ has been changed to ‘RBTC’ on the borrow page collateral dropdown to reflect correct format
  • UX copy on the vesting section of the Rewards SOV page has been updated
  • UX copy on the mobile wallet connection feature has been updated
  • Since rWallet is no longer being maintained, we have added a "Discontinued" notice to it. rWallet will be removed from the list of available wallet options on or around July 1, 2022.
  • We’ve added an Ethereum ‘High Fee’ warning when transferring an asset from RSK to Ethereum via the bridge, on the Review page. “The cost of gas on Ethereum is significantly higher than it is on BSC or RSK.”
  • We’ve added copy updates on the Staking page
  • We’ve added a fix to the Staking Voting Power calculation
  • We’ve added a number of miscellaneous frontend developer component updates
  • And last, but by no means least, we’ve added the Intercom Live Chat Widget, which you’ll find in the dapp!

Stay Sovryn


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