I used to think the hardest part of lending against less-liquid assets was deciding what they were worth.
Looking deeper into @TermMax changed that question for me.
Valuation matters, but there is another problem: what happens if collateral needs to be liquidated and the market simply is not deep enough to absorb it cleanly?
TermMaxโs documentation addresses that through Physical Delivery. If loans remain unpaid or are only partially liquidated after the liquidation window, the process begins automatically. The redemption pool can contain both underlying tokens and collateral tokens, and FT holders receive a proportional share when they redeem.
That made me think differently about RWA lending.
Tokenization can make an asset transferable on-chain, but it does not automatically create secondary-market liquidity. TermMax itself describes Physical Delivery as a mechanism designed for situations involving significant volatility or low liquidity, while also supporting RWA and lower-liquidity collateral.
For me, that is a more interesting test than simply asking whether RWAs can be used as collateral.
A fixed rate can define the economics of a loan. A maturity can define its timeline. But when liquidity disappears, the settlement mechanism becomes just as important.
That is the part of TermMax I want to keep watching: not only how loans begin, but how the system handles the difficult ending.
#termmax @TermMax
Looking deeper into @TermMax changed that question for me.
Valuation matters, but there is another problem: what happens if collateral needs to be liquidated and the market simply is not deep enough to absorb it cleanly?
TermMaxโs documentation addresses that through Physical Delivery. If loans remain unpaid or are only partially liquidated after the liquidation window, the process begins automatically. The redemption pool can contain both underlying tokens and collateral tokens, and FT holders receive a proportional share when they redeem.
That made me think differently about RWA lending.
Tokenization can make an asset transferable on-chain, but it does not automatically create secondary-market liquidity. TermMax itself describes Physical Delivery as a mechanism designed for situations involving significant volatility or low liquidity, while also supporting RWA and lower-liquidity collateral.
For me, that is a more interesting test than simply asking whether RWAs can be used as collateral.
A fixed rate can define the economics of a loan. A maturity can define its timeline. But when liquidity disappears, the settlement mechanism becomes just as important.
That is the part of TermMax I want to keep watching: not only how loans begin, but how the system handles the difficult ending.
#termmax @TermMax