DA-06 · LESSON 03

Liquidator subsidy

KEY DEFINITIONS

Terms used in this lesson

Block subsidy: New bitcoin that consensus permits a block's coinbase transaction to create at a particular height.
Vault: A set of Bitcoin outputs and spending rules that holds collateral and represents the current loan state.
BTC: The common market ticker for bitcoin.
Collateral: An asset pledged against a debt; it can be used to cover the debt if agreed conditions are breached.

The subsidy can rise as a vault falls below a configured ratio, subject to thresholds, increments, and reserve-rate floors.

55 min Difficulty 5/5 Not started

VISUAL MODEL

See the whole mechanism before going step by step

Use the diagrams to orient yourself. Then the guided explanation below teaches every part in depth.

4 explanatory views

CONCEPT-SPECIFIC MAP · ducat vaultA Ducat action moves one Bitcoin-anchored vault state to a successorSelect any state to inspect its exact role.

RELATIONSHIP MAPInputs, rule, and outputs

01
PREDECESSORCurrent vault outpoint
The current Bitcoin output anchors collateral and identifies the state being spent.
02
REQUESTLiquidator subsidy
The Liquidator subsidy workflow proposes one exact action and successor state.
03
POLICYProfile, oracle, signatures
Applicable policy, price evidence, authorization, and transaction shape are checked.
04
BITCOIN SPENDScript-valid transaction
Bitcoin miners and nodes can include only a transaction that satisfies Bitcoin rules.
05
SUCCESSORNew outpoint and state
Ducat validators reconstruct debt, collateral, token, and account changes from the confirmed transaction.

Rule shown: Bitcoin checks the spend; Ducat components independently reconstruct and validate the additional protocol state.

STAGE 1 OF 5PREDECESSOR: Current vault outpoint

The current Bitcoin output anchors collateral and identifies the state being spent.

Governing relationship: Bitcoin checks the spend; Ducat components independently reconstruct and validate the additional protocol state. Complete path: 1. PREDECESSOR, Current vault outpoint. The current Bitcoin output anchors collateral and identifies the state being spent. 2. REQUEST, Liquidator subsidy. The Liquidator subsidy workflow proposes one exact action and successor state. 3. POLICY, Profile, oracle, signatures. Applicable policy, price evidence, authorization, and transaction shape are checked. 4. BITCOIN SPEND, Script-valid transaction. Bitcoin miners and nodes can include only a transaction that satisfies Bitcoin rules. 5. SUCCESSOR, New outpoint and state. Ducat validators reconstruct debt, collateral, token, and account changes from the confirmed transaction.

1. State transitionWhat exists, what changes, and what results

BEFORE

Use source test terms: subsidy threshold 1.30, increment 0.01, liquidation tax 0.05, and minimum reserve 546 sats. Test collateral ratios 1.30, 1.29, and 1.25 on a 1 BTC coll…

MECHANISM

Calculate the candidate vault ratio using the accepted price and current debt.

AFTER

The schedule is piecewise and uses rounded hundredths below the threshold. These values prove source behavior in tests, not active commercial terms.

Text equivalent: Starting from Use source test terms: subsidy threshold 1.30, increment 0.01, liquidation tax 0.05, and minimum reserve 546 sats. Test collateral ratios 1.30, 1.29, and 1.25 on a 1 BTC collateral claim. The mechanism begins when Calculate the candidate vault ratio using the accepted price and current debt. The resulting lesson is The schedule is piecewise and uses rounded hundredths below the threshold. These values prove source behavior in tests, not active commercial terms.

2. Mechanism pathSelect a stage to inspect its job

STAGE 1 OF 4

Measure vault shortfall

Calculate the candidate vault ratio using the accepted price and current debt.

Complete path: 1. Measure vault shortfall: Calculate the candidate vault ratio using the accepted price and current debt. 2. Read the schedule: Load threshold, increment, cap or floor behavior, and reserve-rate inputs from the active profile. 3. Calculate the subsidy: Apply the schedule to the eligible base quantity and show every branch of the piecewise formula. 4. Test reserve and execution limits: A configured incentive is not realizable if required reserve capacity, transaction eligibility, fees, or settlement fail.

3. Rule and failure boundaryWhat accepts the result and where it can stop

ACCEPTED PATH

The worked case executes the named inputs and checks in the displayed order. A configured incentive is not realizable if required reserve capacity, transaction eligibility, fees, or settlement fail.

CHANGED CONDITION

A missing, malformed, stale, unauthorized, or inconsistent required input stops at its first named boundary. It usually accompanies worse collateral conditions and remains exposed to price, execution, fee, funding, and settlement risk.

Important distinction: A larger subsidy always means a better liquidation trade. It usually accompanies worse collateral conditions and remains exposed to price, execution, fee, funding, and settlement risk.

Text equivalent: The accepted path is enforced by The worked case executes the named inputs and checks in the displayed order. A configured incentive is not realizable if required reserve capacity, transaction eligibility, fees, or settlement fail. If the required condition changes, A missing, malformed, stale, unauthorized, or inconsistent required input stops at its first named boundary. It usually accompanies worse collateral conditions and remains exposed to price, execution, fee, funding, and settlement risk.

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Learn the idea

A liquidator subsidy is an additional configured incentive for taking an unsafe vault through liquidation. The captured curriculum describes a schedule that can rise as collateralization worsens and can be constrained by thresholds, increments, and a reserve-rate floor.

GUIDED EXPLANATION1/4 ideas inspected

Measure vault shortfall

Calculate the candidate vault ratio using the accepted price and current debt.

The worked example follows the explanation

Inspect every idea above to open it.

Important distinction“A larger subsidy always means a better liquidation trade.”

It usually accompanies worse collateral conditions and remains exposed to price, execution, fee, funding, and settlement risk.

FINISH LEARNING FIRST

The questions unlock after every required learning activity

Inspect every guided idea, open the worked example, rebuild its mechanism, and complete the deterministic lesson tool. Your progress is saved automatically.