Comment on page
All vaults in the Parallel Protocol are covered by a safety reserve. The safety reserve comes into use when a vault that faces liquidation does not have enough collateral to pay for the entire outstanding debt.
The safety reserve will cover the difference in those cases. Liquidation will simply fail if the safety reserve can not cover it. Once enough fees have been collected, liquidation can proceed. During this time, the safety reserve will take on the volatility risk of the collateral.
Safety Reserve Architecture
There are 338,027 PAR & 27 paUSD on Ethereum, and 54,183 PAR & 0 paUSD on Polygon PoS in the safety reserve (on November 27th 2023).