How does CDP Automation work?

Written by Nikola J.

Updated 3 months ago

Automation is a unique system that can automatically manage your collateralized debt position based on your configuration, effectively providing you with automatic liquidation protection and leverage increase.

How does it work?

Once enabled, Automation will actively monitor your CDP/Vault and automatically increase or decrease leverage when price of the underlying collateral (e.g. ETH or BAT) changes.

Leveraging and deleveraging is done using our signature Boost and Repay functions.

Boost is applied once your ratio grows above the configured maximum ratio. When this happens, more DAI is generated and instantly used to obtain more ETH and add it to the CDP. This increases your ETH exposure, while also increasing your DAI debt and decreasing your ratio.

Repay is applied once your ratio drops below the configured minimum ratio. When this happens, part of the collateral (e.g. ETH) from the CDP is taken out, instantly swapped for DAI and the DAI used to pay back debt. This increases your ratio, while decreasing your DAI debt as well as your ETH exposure.

Note that Automation never has access to any funds in your Ethereum wallet account. All adjustments are made solely using the collateral within the CDP/Vault.

How to configure Automation?

In order to enable Automation, you need to have a CDP/Vault on the Multi-collateral DAI version of the MakerDAO protocol with at least 40,000 DAI debt.

If you meet these requirements, you can go ahead and enable Automation.

Automatic Repay, which provides you with liquidation protection, is triggered as soon as your ratio drops below the configured minimum (the value labeled "If ratio falls below").

Automatic Boost, which provides you with automatic leverage increase, is triggered as soon as your ratio grows above the configured maximum (the value labeled "If ratio goes over").

If you want to test how certain Automation configurations would perform in different market conditions, you can do so using the Simulation tool at DeFi Explore.

What are the fees for using Automation

The service fee for each automated adjustment made by the system is 0.3% of the Repay or Boost amount.

The transaction fee for each adjustment is also charged to the user, but only up to a maximum of 800 Gwei. Anything above this is covered by us.

This doesn't mean that DFS Automation will not send transactions at times when gas prices are above 800 Gwei. It's just a hard cap for the transaction fee charge, where no more than 800 Gwei (* gas used) can be charged to the user.

If you have any additional questions, please reach out to us either via the on-site chat or by joining the DeFi Saver Discord.

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