SCDP

Shared Collateralized Debt Position

This documentation is a work in progress!

The shared collateralized debt position (SCDP) allows different accounts to deposit Collateral Assets into a single position. These pooled deposits are utilized as liquidity for zero-slippage swaps where Kopio Assets can be exchanged to an equal value of another Kopio Asset.

Use Cases

For example, Kopio Assets borrowed from an ICDP can be swapped to another Kopio Asset, translating to a short position on the borrowed asset. Conversely, using ONE or synth wraps to obtain Kopio Assets for a swap allows any Kopio Asset to be acquired without borrowing.

Reasoning

The shared position concentrates the liquidity of Kopio Assets while liquidity providers and traders avoid the downsides of a regular AMM, such as slippage, impermanent loss and fragmented liquidity.

Participants

Accounts can participate in the SCDP as a depositor, trader and/or a liquidator.

Shared Collateralized Debt Position

Risk

Most notable risk to the SCDP is depositors being unable to fully manage their risk, leaving them to rely on the protocols risk mitigation parameters. Since depositors are the counterparty for each swap, they bear the risk of adverse selection and rapid changes to the debt composition which might lead into liquidations. Because of this, the protocol is committed to align the incentives as such.

To mitigate risk of the depositors, the MCR used for the SCDP has a large difference to the liquidation threshold. As collateral is utilized by arbitrary trading and depositors can withdraw any non-utilized collateral, it shouldn’t be a concern to hit the MCR. \