Users interact directly with Vaults and the ADADAO Protocol, and each user has total and independent control over their placed collateral as long as the value of the collateral does not fall below the required minimum level (the Liquidation Ratio).
If the collateral value (in USD) goes too low, the vault is automatically liquidated. Then the Protocol auctions off a portion of the collateral to cover the outstanding debt plus the Liquidation penalty and the protocol also then burns AUSD to deplete the supply.
The collateral that is left over is given to the vault owner.
Copy link