# Recovery Mode

Recovery Mode is triggered when the Total Collateral Ratio (TCR) drops below 150%. During the Recovery Mode, Troves with a collateral ratio below 150% can be liquidated.

### Total Collateral Ratio (TCR)

It is the ratio of the system's total collateral value in USD, based on the current LSD:USD price, to its total debt of the system. In other words, it's the sum of all Trove collateral values in USD divided by the sum of all Trove debt values in USDS.

$$Total Collateral Ratio = {Sum of All Trove Collateral Value in USD\above{2pt}Sum of All Trove Debt Values in USDS}$$

### Recovery Mode

When the Recovery Mode is triggered, the protocol will block borrowers transactions in order to prevent further decrement of the TCR. In this mode, new USDS can only be issued by adjusting existing Troves in a way that improves their collateral ratio, or by opening a new Trove with a collateral ratio of at least 150%. If an adjustment to an existing Trove reduces its collateral ratio, the transaction is only executed if the resulting TCR is above 150%.

Recovery Mode aims to encourage borrowers to take actions that quickly increase the TCR and to motivate USDS holders to refill the Stability Pool. From an economic standpoint, Recovery Mode is structured to encourage debt repayments and collateral top-ups. Recovery Mode serves as a safeguard for the protocol, to drive users to maintaining the health of the protocol.

Recovery mode will not affect the redemption fee, and the borrowing fee will be set to 0% to  encourage borrowing.

During Recovery Mode, a Trove's collateral can be liquidated up to a maximum loss of 110%. Any remaining collateral, which is above the 110% threshold but below the TCR (the minimum collateralization ratio), can be claimed by the borrower through the standard web interface. This implies that a borrower who has their Trove liquidated in Recovery Mode will face the same liquidation "penalty" of 10% as in Normal Mode. In other words, the amount of collateral that can be liquidated in Recovery Mode is capped at 110%, while any additional collateral above that threshold can be reclaimed by the borrower.

### Liquidation under Recovery Mode

#### Case #1: Individual Collateral Ratio (ICR) lower than or equal to 100%

All debt and collateral without BNB gas compensation is distributed to active Troves.

#### Case #2: ICR is between 100% and 110% while the USDS in Stability Pool is greater than Trove debt

USDS in the Stability Pool equal to the Trove's debt is offset with the Trove's debt. The collateral without the BNB gas compensation of the Trove is shared between depositors.

**Case #3: ICR is between 100% and 110% while the USDS in Stability Pool is lower than Trove debt**

All the USDS from the Stability Pool is offset with an equal amount of debt from the Trove, the Trove's collateral is shared among depositors, with the amount distributed proportional to the ratio of its offset debt to its total debt. The remaining debt and collateral without BNB gas compensation is redistribited to active Troves.

#### Case #4: ICR is between 110% and 150% while the USDS in Stability Pool is greater than or equal to Trove debt

USDS from the Stability Pool is offset with an equal amount of debt from the Trove. Depositors of the collateral share a portion of the collateral with a dollar value equal to 1.1 \* debt. No other active Troves receive a redistribution of this amount. Since its ICR was greater than 110%, the Trove has a collateral remainder, which is sent to the CollSurplus Pool and is claimable by the borrower. The Trove is closed.

#### Case #5: ICR within 110% to 150% while Trove debt is greater than USDS in Stability Pool

Nothing happened.

#### Case #6: ICR is greater than 150%

Nothing happened.
