Horizon Academy
English V2
Search
K

Managing Risk

Staking on Horizon Protocol involves some risks that stakers should be aware of. Here are key considerations and strategies to help stakers manage these risks:
HZN Price Fluctuations and your C-Ratio
C-Ratio needs to be maintained to collect rewards. There are two states that your HZN can be in:
  • 'Staked' - HZN in your wallet is staked and earning rewards, but cannot be transferred
  • 'Transferable' - HZN in your wallet is not staked and can be transferred at any time
There are two ways in which C-Ratio can change:
  • If the market price of HZN increases, the amount of HZN tokens you need to collateralize your position will reduce and your current C-Ratio will increase. Horizon Protocol will automatically release the amount of staked HZN you have to become Transferable HZN (or Escrowed HZN if you have staked your rewards) in order to always maintain a 600% ratio based on your current debt. You have the option to re-stake the extra available HZN.
  • If the market price of HZN decreases, your C-Ratio will decrease. If you have Transferable or Escrowed HZN available, Horizon Genesis will automatically migrate those balances to become Staked HZN in order to always maintain the 600% collateralization ratio.
To maintain your C-Ratio, one can:
  • Burn some zUSD to repay part or all of your debt, increasing your C-Ratio.
  • Stake more HZN to provide additional collateral, increasing your C-Ratio. If your C-Ratio is below 600%, adding HZN to your wallet will automatically stake it (up to 600%).
Price Fluctuations in the Global Debt Portfolio
The Global Debt Portfolio represents the total value of all zAssets within Horizon Protocol.
When a user initially mints zUSD by staking HZN, this zUSD is considered debt that you owe Horizon Protocol. To unstake your HZN, you must return this debt.
The value of your minted zUSD is locked as a percentage of the Global Debt Portfolio. If the portfolio's value increases due to rising zAsset prices, your debt will also increase. On the other hand, if the portfolio's value decreases, your debt will also decrease.
Imagine the Global Debt Portfolio in Horizon Protocol is initially worth $990,000 USD, and you decide to mint $1,000 zUSD by staking your HZN. In this scenario, your debt to Horizon Protocol is $1,000 zUSD, which represents 0.1% of the total Global Debt Portfolio value.
Now, let's say the value of the Global Debt Portfolio increases due to the rising prices of zAssets within the protocol. If the portfolio's total worth grows to $1,010,000 USD, which is a 1% increase, your debt also increases. It goes from $1,000 to $1,010 zUSD. This means that you now need to burn or repay $1,010 zUSD to unstake your HZN.
Inversely, if the value of the Global Debt Portfolio decreases by 1% to $990,000 USD, your debt decreases as well. In this case, your debt drops from $1,000 to $990 zUSD. So, you would need to burn or repay only $990 zUSD to unstake your HZN.
This mechanism shows how changes in the Global Debt Portfolio's value can impact your debt and the amount you need to repay to unstake your HZN.
Missed Claims
Claims remain accessible until the commencement of the next reward claim period, which occurs every 7 days. It's essential to claim your rewards before they expire, as unclaimed rewards from the current week will be forfeited and redistributed to the following week's reward pool, benefiting all participants.
Liquidation
If your C-Ratio drops below 200%, you will receive a liquidation flag. You then have a 3-day window to restore your C-Ratio to 600% and remove the liquidation flag; otherwise, your account may undergo liquidation. Once your C-Ratio is back at 600%, you can execute a transaction to clear the liquidation flag.
It's important to note that if you restore your C-Ratio to 600% but do not remove the liquidation flag, your account remains vulnerable to liquidation if it falls below 600% in the future.
In the event of an account liquidation, the liquidation flag is automatically removed without any action required from the user. For more in-depth information on how the liquidation process functions, please refer to the Liquidation page.
Additional guidance on staking HZN and choosing the best approach for your needs can be found in the strategy section.