Stability Pool Redemption

What are Stability Pools in Indigo

Indigo’s Stability Pool is a core mechanism of Indigo which is designed to help the protocol maintain solvency by ensuring that minted iAssets are properly collateralized at all times. In order to participate in this mechanism, users deposit into an individual Stability Pool with their iAssets, which can then be burned to liquidate undercollateralized positions. A Stability Pool participant could liquidate and obtain a position’s underlying ADA at a discount to the market price.

Stability Pool Strategy Vault

Optim’s Strategy Vaults could be used with Indigo as follows: Users will deposit ADA into an Strategy Vault that will use the funds to purchase iAssets in the open market if the user expects the iAsset price to rise, potentially giving Vault users the opportunity to receive liquidated ADA. Alternatively, a similar strategy could begin with receiving the iAsset itself and continuing in the same following steps.

The iAssets could then be deposited into their respective Indigo Stability Pools. During any future liquidation event, iAssets would be burned to offset outstanding loans, which is rewarded by redeeming the underlying ADA (which may be at a price lower than current market prices) as well as via INDY reward distributions. The ADA proceeds could then be reinvested back into the same strategy to compound any positive yield. A user would be able to withdraw their equity in the Strategy Vault, receiving ADA and INDY rewards accrued.