#baby $BABY I used to think Babylon’s lending design from the 78% collateral factor first. It looked conservative: $100 of vaultBTC creates only $78 of borrowing value.
But that is the obvious metric, and it hides the real behavior.
The 22% haircut is not permanent safety. It is the space price movement can consume before the health factor falls below 1.0. Once liquidation starts, Babylon is not just repaying debt. At the maximum bonus, a liquidator receives $110 of collateral for each $100 cleared.
Some incentive is reasonable. Liquidators need a reason to act quickly, especially when delay can turn weakness into bad debt.
Still, the real test is collateral protection vs liquidation efficiency. Does BABY restore the position cleanly to 1.24, or does the 10% bonus remove too much value before that 24% buffer is rebuilt? And how often does a borrower face another liquidation soon after?
Most people will see 78%, 1.24, and 10% as separate settings. I see one mechanism deciding who absorbs volatility, and when.
Babylon succeeds if those settings preserve solvency without making repeated liquidations feel like a hidden tax. My doubt is simple the buffer may look strong on paper, but stress decides whether it is durable.
@BabylonLabs_io #baby $BABY
But that is the obvious metric, and it hides the real behavior.
The 22% haircut is not permanent safety. It is the space price movement can consume before the health factor falls below 1.0. Once liquidation starts, Babylon is not just repaying debt. At the maximum bonus, a liquidator receives $110 of collateral for each $100 cleared.
Some incentive is reasonable. Liquidators need a reason to act quickly, especially when delay can turn weakness into bad debt.
Still, the real test is collateral protection vs liquidation efficiency. Does BABY restore the position cleanly to 1.24, or does the 10% bonus remove too much value before that 24% buffer is rebuilt? And how often does a borrower face another liquidation soon after?
Most people will see 78%, 1.24, and 10% as separate settings. I see one mechanism deciding who absorbs volatility, and when.
Babylon succeeds if those settings preserve solvency without making repeated liquidations feel like a hidden tax. My doubt is simple the buffer may look strong on paper, but stress decides whether it is durable.
@BabylonLabs_io #baby $BABY