Understand Collateral
Last updated
Last updated
The Filecoin Miner Actor generally holds FIL in 3 "buckets":
Available balance - the liquid FIL held on the Miner Actor that is available for withdrawing by the Miner's owner
Vesting balance - the illiquid FIL that vests, earned from winning block rewards from storage mining
Pledged collateral - FIL that is already pledged to the network for storing data
Generally, when you look at a healthy Miner Actor, the buckets look something like this:
Equity value - in general, GLIF treats all these balances as collateral within the system, and refers to them as the Miner Actor's "equity value". See the Storage Provider Equity section for more details.
The next concepts that are important to understand are liquidation values, recovery rates, and risk of loss:
Liquidation value - the amount of FIL you should expect to receive after terminating the Miner and all of its sectors
Recovery rate - the % of FIL you would expect to recover from the Miner after terminating the Miner and all of its sectors
Risk of loss - the amount of FIL you stand to lose in a liquidation event
1000 FIL
70%
700 FIL
300 FIL
500 FIL
50%
250 FIL
250 FIL
250 FIL
100%
250 FIL
0 FIL
During our 18 month research phase, we conducted several termination simulations to better understand recovery rates and liquidation values on Filecoin. On average, our research shows an average network recovery rate of roughly 60%, which means (on average), the risk of loss on any FIL deployed to SPs hovers around 40%.
It's now much easier to describe the conservative economic models:
Storage Providers must lock an amount of equity in the protocol equal to the amount of funds they wish to borrow.
When you write out the math, and assume an average recovery rate of 60%, you can see how (theoretically), the risk of loss on the GLIF pool is 0 FIL. For instance, imagine the following scenario:
Storage Provider equity - 1000 FIL
Storage Provider borrowed funds - 1000 FIL
Storage Provider total funds - 2000 FIL
In this example, the Storage Provider has borrowed an equal amount of FIL as they have in equity. In other words, the Storage Provider brought 1000 FIL to the protocol, and then borrowed another 1000 FIL, summing to a total of 2000 FIL held by the Storage Provider. Now imagine a liquidation event that recovers 60% of funds, recovering 40%:
Recovered funds - 1200 FIL
Lost funds - 800 FIL
Since the pool recoups its FIL before the SP does, the pool did not lose any money after liquidating this Storage Provider:
Pool lent funds: 1000 FIL
Pool recovered funds: 1200 FIL
Pool loss: 0 FIL
In this example, the Storage Provider will actually recoup 200 FIL after the liquidation finishes.
