Liquidations
A Trove is liquidatable when its collateral ratio is at or below the minimum collateral ratio configured for its collateral branch.
Collateral ratio is:
CR = collateral value / starUSD debt valueCR can fall when collateral price falls, a borrower withdraws collateral, or a borrower mints additional starUSD debt.
Liquidation Waterfall
Lucent uses a three-step liquidation waterfall.
| Step | Role |
|---|---|
| JIT liquidation | Preferred path when liquidity can be sourced atomically at liquidation time. |
| Stability Pool | Uses existing starUSD deposits to cancel liquidated Trove debt. |
| Redistribution | Allocates remaining debt and collateral across active Troves if the pool cannot fully offset. |
Stability Pool Offset
Users deposit starUSD into the Stability Pool. When a Trove is liquidated, pool starUSD is burned to cancel the Trove's debt. The liquidated XLM collateral is distributed to Stability Pool depositors pro rata, including liquidation gains.
The Stability Pool is also a yield venue. It can receive a share of borrower interest revenue in addition to liquidation proceeds.
Just-in-Time Liquidation
JIT liquidation sources starUSD when a liquidation occurs instead of relying only on idle Stability Pool liquidity.
When flash-loan liquidity and starUSD DEX liquidity are available, a liquidator can source USDC, swap into starUSD, deposit the starUSD into the Stability Pool or liquidation path, trigger liquidation, receive collateral, swap enough collateral back to repay the liquidity source, and keep any surplus after fees.
This improves capital efficiency because Lucent does not need to overpay indefinitely for a large idle Stability Pool.
Redistribution
If the Stability Pool and JIT paths cannot fully offset the liquidation, remaining debt and collateral are redistributed across active Troves according to protocol accounting rules. In this fallback, active borrowers are guarantors of last resort.
Redistribution is a solvency mechanism, not a peg-demand mechanism. It keeps protocol accounting fully collateralized when immediate starUSD liquidity is insufficient.