Burn / Repay

Repaying borrowed Kopio Assets of an ICDP

This documentation is a work in progress!

Repaying debt is the most effective way to increase your health factor.

As with minting, the term burn comes from the ERC-20 standard and it refers to the process of decreasing the supply of a token.

Repayment of debt in the protocol is done by a function which burns the amount repaid from the repaying accounts balance. This decreases the total supply of the Kopio Asset and decreases the protocol debt amount for the repaying account.

Because the debt value for the asset within the protocol is reduced, the account is now able to withdraw any collateral that was backing it.

Each burn will emit an event with relevant information

/**
 * @notice Emitted when an account burns a Kopio asset.
 * @param account The address of the account burning the Kopio asset.
 * @param kopioAsset The address of the Kopio asset.
 * @param amount The amount of the Kopio asset that was burned.
 */
event KopioAssetBurned(address indexed account, address indexed kopioAsset, uint256 indexed amount);

Conditions Preventing Repayments

Unlike minting, repayment of debt is not limited by the market status of the underlying asset but two situations exist where users wont be able to do so.

Minimum Debt Value

Protocol has a USD-denominated lower limit that forbids tiny debt positions. This prevents spamming and ensures no dust positions form which could get annoying for the users themselves and troublesome for liquidators to process.

This means if the Minimum Debt Value is $10 and debt owed is valued $300, repaying $290.01 will not work. Repaying any amount less or equal to $290 or the full $300 will work.

Safety State: Pause

In an emergency situation the Safety Council multisig can pause repayments for a Kopio Asset to prevent possible negative impact it would have.