Fixed-rate is not liquidation insurance.
A TermMax borrowing position can still be liquidated for two reasons. The first is an LTV that reaches or exceeds LLTV because collateral falls or the debt token rises. The second is simpler: the borrower misses the fixed maturity repayment.
The numbers matter here.
If outstanding debt is above $10,000, a liquidator can cover no more than 50% of the total debt value in a partial liquidation. A 10% penalty is charged against the liquidated debt value: 5% rewards the liquidator and 5% goes to the protocol reserve.
Missing maturity opens a two-hour liquidation window. If debt remains unpaid or only partly liquidated when that window ends, physical delivery starts. The FT redemption pool can then contain both debt tokens and collateral. FT holders receive a proportional mix based on their share of outstanding FT.
That changes the audit on both sides. A borrower should check LLTV, oracle design, collateral liquidity and maturity. An FT buyer should also ask which collateral could arrive if the debt does not settle cleanly.
Fixed rates remove rate drift. They do not remove collateral, oracle or settlement risk.
@TermMax #TermMax
A TermMax borrowing position can still be liquidated for two reasons. The first is an LTV that reaches or exceeds LLTV because collateral falls or the debt token rises. The second is simpler: the borrower misses the fixed maturity repayment.
The numbers matter here.
If outstanding debt is above $10,000, a liquidator can cover no more than 50% of the total debt value in a partial liquidation. A 10% penalty is charged against the liquidated debt value: 5% rewards the liquidator and 5% goes to the protocol reserve.
Missing maturity opens a two-hour liquidation window. If debt remains unpaid or only partly liquidated when that window ends, physical delivery starts. The FT redemption pool can then contain both debt tokens and collateral. FT holders receive a proportional mix based on their share of outstanding FT.
That changes the audit on both sides. A borrower should check LLTV, oracle design, collateral liquidity and maturity. An FT buyer should also ask which collateral could arrive if the debt does not settle cleanly.
Fixed rates remove rate drift. They do not remove collateral, oracle or settlement risk.
@TermMax #TermMax