🔁Reserve Auctions
Last updated
Last updated
What are reserves? What are claimable reserves? What is Net Interest Margin? What is a reserve auction? When do reserve auctions occur? Who triggers reserve auctions, is there an incentive? How do I participate in a reserve auction?
Reserves are a balance of funds that are collected from Origination Fees, Net Interest Margin and Penalties. Each pool has a reserve, denominated in the pool's quote token. Reserves act as backup funds for covering bad debt and are also used for buying and burning AJNA tokens through reserve auctions.
Claimable reserves are a portion of a pool's reserves that are eligible to be claimed through a reserve auction. For a comprehensive breakdown see section 9.1 in the whitepaper.
Net Interest Margin(NIM) is a portion of the interest revenue that goes to the pool's reserves and is used to provide a liquidity cushion to lenders and absorb bad debt if some should occur. The NIM is approximately 10% of the interest rate revenue.
A reserve auction is a sale of claimable reserves for AJNA tokens through a dutch auction. The bidder receives quote tokens, while the protocol receives and burns the AJNA.
Reserve auctions occur when enough claimable reserves accumulate such that the person triggering the reserve auction makes more money than the transaction costs. Reserve auctions can occur at a maximum of once every two weeks per pool.
Anyone can trigger a reserve auction and the incentive is to purchase the reserves at a discount to market, making a profit on the spread.
Through your interface of choice.
