Settlement
Last updated
Last updated
When fCash reaches maturity, it converts to cash. An account’s cash balance reflects how much currency (DAI, USDC, ETH .. ) that account has access to.
An account with a positive cash balance can withdraw the underlying currency at any time provided that withdrawal does not cause the account to become under-collateralized.
A negative cash balance represents a debt to the protocol that has matured.
Notional needs accounts to cover the debts that they owe in order for accounts with positive cash balances to be able to freely withdraw their cash. The protocol can enforce accounts to collateralize their negative cash balances, but it can't force an account to settle their negative cash balances.
To solve this problem, we allow third party settlers to purchase an account's collateral in exchange for providing the cash that they owe to the protocol. This process is very similar to liquidation and amounts to a penalty on overdue debts.
Any account with a negative cash balance and positive free collateral is eligible for third party settlement. If they have negative free collateral, they must first be liquidated before they can be settled.
In the event that an account has no assets in its portfolio and only a a negative cash balance, Notional's reserve funds will be used to cover the account's obligations to the protocol.
