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  • šŸ‘‹Welcome to GLIF
    • Intro
    • History of GLIF and Filecoin DeFi
  • Storage Provider Economics
    • Use Cases
    • Storage Provider Equity
    • Storage Provider Liquidation Value
    • Storage Provider Earnings
    • Borrowing Limits
    • Guarantors
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  • Token holder economics
    • How it works
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    • Rewards & iFIL
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  1. Storage Provider Economics

Storage Provider Liquidation Value

In addition to equity values, liquidation values are used to determine borrow limits

PreviousStorage Provider EquityNextStorage Provider Earnings

Last updated 1 year ago

An SP's liquidation value represents the amount of FIL the protocol expects to recover in a liquidation event. To read more about liquidations, see .

It's extremely important each Storage Provider understands liquidation values and their significance within the protocol.

Liquidation values are computed as follows:

  1. Compute SP maximum termination penalty - the termination penalty is the amount of FIL that will be slashed after terminating the SP's active sectors.

  2. Compute SP recovery rate - computed as:

    RecoveryRate=(InitialPledgeāˆ’TerminationPenalty)/InitialPledgeāˆ—100RecoveryRate = (InitialPledge - TerminationPenalty) / InitialPledge * 100RecoveryRate=(InitialPledgeāˆ’TerminationPenalty)/InitialPledgeāˆ—100

  3. Compute SP liquidation value - computed as:

    LiquidationValue=AvailableBalanceāˆ—RecoveryRate+VestingBalance+InitialPledgeāˆ’TerminationPenaltyLiquidationValue = AvailableBalance*RecoveryRate + VestingBalance + InitialPledge - TerminationPenaltyLiquidationValue=AvailableBalanceāˆ—RecoveryRate+VestingBalance+InitialPledgeāˆ’TerminationPenalty

Using an example, let's imagine an SP with the following balances:

  • Initial Pledge - 100 FIL

  • Available Balance - 20 FIL

  • Vesting Balance - 10 FIL

  • Max Termination Penalty - 15 FIL

The recovery rate is:

  • RecoveryRate=(InitialPledgeāˆ’TerminationPenalty)/InitialPledgeāˆ—100RecoveryRate = (InitialPledge - TerminationPenalty) / InitialPledge * 100RecoveryRate=(InitialPledgeāˆ’TerminationPenalty)/InitialPledgeāˆ—100

  • (100-15)/100 => 85/100 => 85% recovery rate

The liquidation value is:

  • LiquidationValue=AvailableBalanceāˆ—RecoveryRate+VestingBalance+InitialPledgeāˆ’TerminationPenaltyLiquidationValue = AvailableBalance*RecoveryRate + VestingBalance + InitialPledge - TerminationPenaltyLiquidationValue=AvailableBalanceāˆ—RecoveryRate+VestingBalance+InitialPledgeāˆ’TerminationPenalty

  • (20 * 85%) + 10 + 100 - 15 = 112 FIL liquidation value

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