Built-in insurance
Each pool has its own insurance fund; it is established by setting aside a percentage of 5% of accrued interest charged to the borrower.
Following a default and the auction mechanism described above, two alternative scenarios may arise:
As mentioned, if the lenders reject the best offer received in the auction, they can ask for the partition of the insurance fund;
On the contrary, if they accept the bid, the insurance fund is automatically acquired by the person/organization who won the auction.
The insurance sum is converted to protocol revenues when a pool is closed.
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