It's 2 a.m. and a @TermMax loan just matured. No repayment came in. For the next two hours, anyone can liquidate it — then the window shuts.
That's odd if you're used to LTV-triggered liquidations. Here the trigger is a clock, not a price. The 10% penalty on liquidated debt isn't really a fee — half goes to whoever closes the position, half to the protocol reserve. It's a bounty for making sure a bot is awake at that exact hour, not whenever price happens to move.
Fine for ETH or a stablecoin. Different story for a PT token or a thin LRT. Two hours is plenty of time to route through a deep pool. It's not much time to unwind real size in collateral that barely trades on a normal day.
TermMax's physical delivery mechanism is supposed to hand lenders a pro-rata slice of collateral if the window closes without a clean liquidation. What I'm not sure of is how automatic that handoff actually is — that's the part of the docs I keep rereading.
Either way, the risk doesn't vanish at the two-hour mark. It moves from the liquidator to the lender.
Which collateral would you not want to be holding when that window opens, and why?
#termmax @TermMax
That's odd if you're used to LTV-triggered liquidations. Here the trigger is a clock, not a price. The 10% penalty on liquidated debt isn't really a fee — half goes to whoever closes the position, half to the protocol reserve. It's a bounty for making sure a bot is awake at that exact hour, not whenever price happens to move.
Fine for ETH or a stablecoin. Different story for a PT token or a thin LRT. Two hours is plenty of time to route through a deep pool. It's not much time to unwind real size in collateral that barely trades on a normal day.
TermMax's physical delivery mechanism is supposed to hand lenders a pro-rata slice of collateral if the window closes without a clean liquidation. What I'm not sure of is how automatic that handoff actually is — that's the part of the docs I keep rereading.
Either way, the risk doesn't vanish at the two-hour mark. It moves from the liquidator to the lender.
Which collateral would you not want to be holding when that window opens, and why?
#termmax @TermMax
