I used to think liquidation on @TermMax ended with something fairly familiar: collateral gets sold to repay debt. But after reading the mechanism more closely, three numbers stopped me: $10,000, 50%, and two hours. For debt above $10,000, a single liquidation is capped at 50% of the debt value; the liquidated portion carries a 10% penalty, split 5% to the liquidator and 5% to the protocol reserve. More importantly, for loans unpaid at maturity, TermMax provides a two-hour liquidation window. If debt still remains after that window, the system does not assume the market will always find enough liquidity to keep converting collateral. Physical Delivery begins, and the redemption pool can contain both the underlying debt token and collateral for FT holders to redeem proportionally. That transition from liquidation to Physical Delivery is what I find most interesting. A lender may enter expecting repayment in the debt asset, but under stress, the collateral can still exist even when the market fails to fully convert it into that asset. In normal conditions, liquidation hides this distinction. When liquidity is insufficient, it becomes explicit: fixed income can fix the terms of a claim, but it cannot guarantee that the market will always transform the assets behind that claim into the exact form of repayment a lender expects. That is why I no longer look only at APY. APY tells me what the position pays when markets work smoothly. Physical Delivery tells me what the claim becomes when conversion cannot be completed. #TermMax @TermMax