Overview

This page explains what the multicollateral upgrade is and why it's needed.

This page only discusses the upgrade from a high-level perspective. See the following pages for detailed changes.

Background

Historically, the Linear Finance platform only accepts its native currency LINA as collateral for minting lUSD, the currency used in the Linear Exchange for synthetic asset trading. This limits the supply of lUSD and thus causes issues:

Friction onboarding traders

While the platform offers "unlimited liquidity" for trading, it's only for the conversion between different synthetic asset types, not for traders entering/exiting the platform (i.e. acquiring/liquidating lUSD).

Traders buy/sell lUSD through third party exchanges, and an abundance of lUSD supply is needed to ensure stable prices and low slippages.

Insufficient lUSD for liquidations

Debt liquidation (not to be confused with perpetual position liquidation) requires lUSD to be burnt. The larger the lUSD supply is, the easier it is for liquidators to acquire lUSD and perform liquidations in a timely manner, which is critical to the health of the platform.

On the contrary, the lack of lUSD supply forces its price up, making liquidations unprofitable. Liquidators would no longer be incentivized to perform liquidations, and bad debt might be created.

What's changed

Simply put, the multicollateral upgrade changes the platform to accept collateral tokens other than LINA. The lUSD token minted remains to be the same one as before.

ℹ️ Note

There's only one lUSD token. All collateral tokens would mint the same fungible lUSD token. This means that lUSD minted from one collateral token can be used to repay debt incurred under another collateral token.

The support for multiple collateral tokens is conceptually similar to "subaccounts". Each such "subaccount" under the same user is completely isolated from others. The unique key to identify a debt position changes from (user_address) before the upgrade to (user_address, collateral_token) after the upgrade.

ℹ️ Note

The system treats different debt positions under the same user in isolation. It's thus possible for a user to have a healthy debt position in one collateral token, and a liquidatable position under another.

The upgrade only affects the building aspect of the platform, and the trading side is completely unaffected. The contracts and dapps powering Linear Exchange only care about the lUSD token out of the entire minting system, and the fact that only one lUSD token exists hasn't changed with the upgrade.