Borrowing & Liquidation

How Troves, borrowing, and liquidations work on Hann Finance

This page explains how to open a Trove, mint USDHN, and manage the main risk: liquidation.

Not investment advice — Borrowing against crypto collateral is risky. Liquidations and losses are possible.

At a glance

• A Trove is your CDP position: collateral in, USDHN out.

• Your safety is mainly controlled by your Collateral Ratio (CR).

• Minting USDHN creates a USDHN obligation you must repay to close.

• If CR gets too low, your Trove can be liquidated.

• Collateral markets are separated into collateral branches (risk is ring-fenced per branch).

Understand the obligation — Selling or swapping the USDHN you minted does not remove your debt. To close the Trove, you will need to repay USDHN later (often by buying it back).

The Trove lifecycle in one diagram

Key concept: Collateral Ratio (CR)

$$CR = \frac{\text{Collateral Value}}{\text{Debt Value}}$$

• If collateral price falls → CR decreases.

• If you mint more USDHN (more debt) → CR decreases.

• If you add collateral or repay debt → CR increases.

[TBD] Thresholds by collateral — Each collateral branch has its own safety parameters (e.g., minimum CR). These values are defined on-chain and shown in the official UI. This GitBook does not hardcode them to avoid staleness.

How to open a Trove

1

Step 1: Choose a collateral branch

Pick the collateral you want to deposit (e.g., KAIA or a Kaia LST-related asset).

Your choice affects:

• price volatility profile

• oracle and liquidity conditions

• liquidation and redemption dynamics

2

Step 2: Decide your safety buffer

Set collateral and USDHN mint amount so your CR has a buffer above the minimum.

Practical tip: treat the UI “liquidation price” as a risk indicator, not a target.

3

Step 3: Confirm the transaction

After confirmation:

• your Trove is created

• USDHN is minted to your wallet

• you can adjust the Trove at any time (subject to system conditions)

How liquidation works (user perspective)

A liquidation is a forced position cleanup that happens when your Trove becomes unsafe.

Typical triggers:

• collateral price drops

• you mint more USDHN without adding collateral

• you withdraw collateral too aggressively

What you lose

• Part (or all) of your collateral can be sold/redistributed as the system repays your debt.

• You may also pay liquidation-related penalties and execution costs.

Liquidation can happen faster than you expect in volatile markets.

How to reduce risk

FAQ

Deep dives (optional)

• Trove mental model (isolated positions, branches): Trove Concepts Deep Dive

• CR and liquidation price (with examples): CDP Safety Deep Dive

• Liquidation + Earn mechanics (what changes during events): Liquidations & Earn Deep Dive

Next reads

• Stable asset basics and Earn: USDHN & Earn

• Peg and redemptions: Redemptions & Risk

• Automation: Zapper Guide