Why fund the pool in advance?
The protocol needs KRW* to settle a liquidated position’s debt. Having to buy it on the market each time could delay settlement. The SP offsets debt with KRW* already deposited in the pool. The tokens used are burned, and the pool receives its designated share of the liquidated collateral.How liquidation changes the pool’s assets
Suppose the SP holds 10 million KRW*, uses 2 million to offset liquidated debt, and receives collateral worth more than the debt offset. This example values each KRW* at ₩1. The 2 million KRW* used to settle the debt is burned.Before · SP deposits10M KRW*
2M KRW* used to offset debt
After · KRW* remaining8M KRW*
KRW* still held in the pool
After · Collateral received₩2M + α Collateral value
Received as collateral, not KRW*
What do depositors receive?
The SP receives a share of borrowing interest. Its income depends on how much users borrow, their interest rates, and the rules for allocating interest. If deposits grow while interest income stays the same, the interest earned per unit deposited can fall. If you deposit in the SP, consider what price the liquidation collateral could actually sell for. The oracle price does not guarantee that all of the collateral can be sold at that price.Planned automatic rebalancing
batt plans to add automatic rebalancing that converts collateral received from liquidations into KRW*. This would reduce the need for depositors to sell the collateral themselves. The amount received would depend on the sale price and trading costs.How the SP differs from sKRW*
The SP settles debt within the protocol. sKRW* is a deposit product that puts funds into the SP. How the SP works does not determine sKRW*‘s withdrawal terms. See sKRW*: How it works for the allocation plan and the terms to check before withdrawing.What if the SP cannot cover the debt?
See how JIT liquidation and redistribution handle debt left after the SP, and where losses can remain.