I’ve seen DeFi spend years treating liquidity like something that will always be there when a position needs to unwind. Most of the time that assumption sits quietly in the background. Then volatility hits, everyone wants the same exit, and suddenly the collateral that looked perfectly usable becomes much harder to sell at anything close to the expected price.

That’s why TermMax’s physical delivery mechanism caught my attention more than the fixed-rate side at first. If liquidation liquidity is weak, the system can deliver collateral directly to lenders instead of pretending an immediate market sale will always work. It sounds less elegant than instant liquidation, but maybe that’s exactly why it feels more realistic for RWAs and thinner assets.

That’s the part I keep coming back to. An illiquid asset doesn’t become liquid just because it gets tokenized. Real estate exposure, private credit, or some low-volume collateral can still have slow price discovery and awkward exits. Moving it on-chain doesn’t erase that friction.

I’m not sure yet how lenders will value the possibility of actually receiving the collateral, especially when custody, valuation, or eventual resale becomes their problem.

But at least the design acknowledges the mismatch instead of hiding it. Maybe physical delivery is really about letting DeFi work with illiquidity without pretending illiquidity disappeared.
#termmax @TermMax $GPS