The disabled backstop
Every Precept market has a backstop contract, and you will see its address in the market's contract set. It does not protect anyone, and you should not treat it as insurance.
Why it still exists
The market code expects a backstop to be present. A market cannot become active unless its backstop passes a threshold, and the market's automatic status logic still reads the backstop's balance.
Templar's markets meet the threshold with an activation stack of their own: a dedicated factory, a Comet pool, an emissions-disabled backstop, and placeholder tokens with no value. It is not real capital, and those tokens are not the real assets, so do not treat them as such.
What is switched off
| Feature | In Precept |
|---|---|
| Backstop funds a liquidation | Never happens. No reachable market path asks the backstop for money |
| Backstop absorbs bad debt | Never happens. Bad debt goes to the lenders of the affected reserve |
| Backstop's share of interest | Fixed at 0 when a market is deployed |
| Interest auctions | Cannot be created or filled |
| Bad-debt auctions | Cannot be created or filled |
| Backstop rewards and emissions | distribute, gulp_emissions, add_reward, remove_reward, claim and drop always fail |
| Token emissions to markets | Cannot be configured |
What it can still do
The backstop can still affect a market's status, which is the part integrators and market admins need to understand:
- Status changes. Automatic on-ice and frozen statuses depend on the backstop's balance for that market and on how much of it is queued for withdrawal. Anyone can trigger that recomputation with
update_status. - New borrowing. A backstop below the threshold keeps a market on-ice, which stops new borrows. It does not put existing deposits at risk.
- Deposits and withdrawals.
deposit,queue_withdrawalandwithdrawstill work. A withdrawal waits behind a 17-day lock.
Where a loss goes instead
If a borrower's collateral runs out, the market settles it in one step, in the same transaction as the final auction fill or in a later bad_debt call:
- Any supply the borrower holds in the reserve they owe is set against the debt.
- The remaining debt lowers that reserve's
b_rate, so its lenders share the loss pro rata. - If any debt was defaulted, the collateral the borrower still holds moves to a market-owned position nobody can withdraw. If step 1 repays the debt in full, the borrower keeps that collateral.
When the collateral runs out walks through this from a lender's point of view. For the code, see Code lineage.