# Emergency Mode

When the protocol reaches a critical state of having no buffer, it is at risk of approaching undercollateralization and being unable to process redemptions. If the collateral ratio is less than 100% (time averaged over 1 week, 3 days and 24 hours) then Emergency Mode is activated. To remedy this, the protocol goes into a status in which all vaults are liquidated for USDC which is done via a Dutch auction process. During this process minting and redeeming is disabled. Once all USDC has been acquired from winding down the vaults, NUON is redeemable at a pro rata value.

Individual vaults can also be closed if the vault is underperforming. This is determined as the vault having <90% value compared to the amount of USDC input into the vault. The vault must also have a return that is less than the average return rate for all vaults. If both conditions are met, then the vault begins a wind down with its assets being sold for USDC in a Dutch auction and placed into the buffer.


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