Liquidations

SPs must keep track of their DTL ratio to avoid liquidations or restrictions

Managing Debt-to-Liquidity Ratio to Prevent Liquidation

Liquidation Threshold: Debt-to-liquidation (DTL) > 85%

DTL measures the economic security of any SP in the GLIF system because it exposes the collateral status of SPs. A DTL < 100% means an SP is over-collateralized because a liquidation is expected to recover all interest and principal owed by the SP to the pool. In other words, a liquidation would recover >100% of assets owed to LPs.

SPs with a DTL ratio above 85% are in a critical risk zone for liquidation. Immediate corrective actions and proactive communication with the GLIF team are essential to avoid liquidation and minimize further losses.

In the event of a liquidation, all interest and principal is expected to be repaid to the pool on behalf of SPs. If there is excess FIL available after a liquidation, the GLIF treasury charges a 10% liquidation fee on top of the total interest + principal owed to the pool. Any excess FIL after LPs and the GLIF treasury are both repaid is returned to the SP.

Managing Storage Provider liquidations is currently manually enforced by the core GLIF team for the safety of Storage Providers. Algorithmic liquidations are coming soon, once a few new Filecoin Improvement Proposals [1] [2] are passed and built into the core Filecoin protocol.

GLIF Administration - DTL > 75%

In addition to disabled borrowing and withdrawing from GLIF, SPs with a DTL ratio above 75% are eligible to be put on "administration", which allows GLIF to pay down the SP's debt using any available balances on the SP's miners. No terminations or penalties occur if a GLIF administrator pays down an SP's debt. The goal of the administrator is to recover the SP into good standing with GLIF (DTL < 75%).

Healthy SP criteria

1. Debt-to-Liquidation (DTL) < 75%

2. Faulty sectors <12% of all active sectors

If an SP's DTL ratio goes above 75%, it is not immediately in danger of liquidation. However, the SP is eligible for administration. If an SP's DTL goes above 85%, it is in danger of liquidation. It is highly recommended to contact the GLIF team immediately if any SP's DTL ratio exceeds 75%.