Arbitrage and Liquidation

KUSD offers great opportunities for arbitrage traders since minting and repaying KUSD is free and gas fees are non-existent on the Koinos blockchain. Vault holders can repay their loan cheaper if KUSD falls below $1 and sell additional KUSD at a profit if the price climbs above $1.

If a vault falls short of the 150% collateral ratio requirement, the possibility of a liquidation opens up. Other vault holders can trigger a liquidation event and receive the vault's collateral and debt, realizing a profit of up to 50%. The KUSD which was minted by the owner of the liquidated vault remains in circulation; the associated debt is transferred so the KUSD in circulation still remains overly collateralized. Due to the liquidation he incurs a loss for mismanaging his vault position. It is advised to keep a high enough collateral ratio to avoid liquidation, preferably 250% or higher.