USDH Vault
How the USDH Vault maintains system health and rewards Hubble's users.
USDH is programmed and designed to be backed by collateral at all times. The USDH Vault (formerly Stability Pool) helps guarantee this collateral backing and at the same time democratizes the liquidation process for users who participate by depositing USDH.
USDH Vault providers ensure USDH debts can be repaid when collateral ratios fall below an acceptable level. As a reward for keeping the protocol healthy, the guarantors who deposit USDH into the USDH Vault receive a proportional share of collateral from liquidated accounts.
As an added incentive for depositing USDH and maintaining system health, USDH Vault providers also receive HBB token rewards for their participation.
In the event that the USDH Vault is emptied, liquidations are handled through redistribution. This process redistributes users' debt and collateral until more USDH is deposited in the USDH Vault.
How the Stability Vault works

USDH Vault Liquidations

In order to clear bad debt, USDH from the USDH Vault is burned and collateral is redistributed. Through this process, USDH Vault providers essentially receive blue-chip cryptos for a ~10% discount (0.5% of the liquidation goes to the user who triggers the liquidation).
When liquidations are triggered, the balance of each USDH Vault provider's USDH deposit decreases proportionately to the amount of debt being cleared. At the same time, users receive liquidated assets in direct proportion to their contribution to the USDH Vault.
For example, if a liquidation equals 10% of the total USDH deposited in the USDH Vault, 10% of each USDH Vault provider's USDH deposit is burned.
If a user has deposited 5% of the USDH in the USDH Vault, they will receive 5% of the 89.5% of the assets liquidated (the other 10% is returned to the user, with another 0.5% going to the liquidator).
Here is an example of five USDH Vault positions before liquidation:
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User#1 User#2 User#3 User#4 User#5
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USDH Deposit 1500 2500 3500 2000 500
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% of SP 15% 25% 35% 20% 5%
4
Total $Value $1500 $2500 $3500 $2000 $500
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A position is liquidated that has minted 800 USDH with 10 SOL deposited (1 SOL = 100 USD). The user who triggered the liquidation receives .05 SOL. There is now 800 USDH to clear and 8.95 SOL to distribute to USDH Vault providers.
800 USDH is 8% of the USDH Vault, so 8% of each user's deposit will be burned, and then each user is rewarded their fair share of the 8.95 SOL.
Here is the USDH Vault after liquidation:
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User#1 User#2 User#3 User#4 User#5
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USDH Deposit 1500 2500 3500 2000 500
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% of SP 15% 25% 35% 20% 5%
4
USDH Burned 120 200 280 160 40
5
USDH Balance 1380 2300 3220 1840 460
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Liq. Reward 1.3425 SOL 2.2375 SOL 3.1325 SOL 1.79 SOL .4475 SOL
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Reward $Value $134.25 $223.75 $313.25 $179 $44.75
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Total $Value $1514.25 $2523.75 $3533.25 $2019 $504.75
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Notice that:
  • Each user has a lower USDH balance after clearing a liquidation.
  • Each user has increased the total dollar value of their position.

Redistribution (USDH Vault Empty)

If the USDH Vault is empty, then Hubble needs to find another way to guarantee debt can be paid so uncollateralized USDH does not exist in the market. This is done by redistributing debt and collateral among other debt holders.
For example, if Hubble needs to distribute a debt of 100 USDH which is backed only by 130 worth of SOL, but the USDH vault is emptu, then it distributes 100 USDH among all debt holders and 130 collateral to all. The amount they get is based on their debt percentage of the entire pool. For example:
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User#1 User#2 User#3 User#4 User#5
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SOL (in usd) +100 +300 +60 +70 +60
3
BTC (in usd) +100 +100 +60 +60 +40
4
Total Coll +200 +400 +120 +130 +110
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Debt (USDH) -100 -100 -100 -100 -110
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Net Value +100 +300 +20 +30 +10
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Coll. Ratio 200% 400% 120% 130% 110%
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Let's say we liquidate user 5, the remaining users look like:
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User#1 User#2 User#3 User#4
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SOL (in usd) +100 +300 +60 +70
3
BTC (in usd) +100 +100 +60 +60
4
Total Coll +200 +400 +120 +130
5
Debt (USDH) -100 -100 -100 -100
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Net Value +100 +300 +20 +30
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Pool Pct 25% 25% 25% 25%
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Coll. Ratio 200% 400% 120% 130%
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Then everyone gets 25% of the debt and 25% of the collateral:
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User#1 User#2 User#3 User#4
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SOL (in usd) +117.5 +317.5 +77.5 +87.5
3
BTC (in usd) +115 +115 +75 +75
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Total Coll +232.5 +432.5 +152.5 +162.5
5
Debt (USDH) -125 -125 -125 -125
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Net Value +107.5 +307.5 +27.5 +37.5
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Coll. Ratio 186% 346% 122% 130%
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Notice that:
  • Net value increased.
  • The collateral ratio has decreased for some, increased for others.