Most DeFi liquidations end with one thing: collateral gets sold into the market.
#TermMax takes a different route with physical delivery. If volatility spikes or liquidity dries up, collateral can instead be delivered directly to lenders as compensation.
That gets interesting when the collateral is an RWA or another asset that isn't easy to sell quickly without taking a serious haircut.
I actually like the idea because it recognizes a problem DeFi often glosses over: liquidity isn't guaranteed just because an asset has a price.
But there's a trade-off. Receiving an illiquid asset instead of cash may protect lenders from a forced market sale, yet it also leaves them holding something they may struggle to exit.
So I'm wondering: does physical delivery make liquidation more resilient, or does it simply move the liquidity problem from the protocol to the lender? 🤔
#termmax @TermMax
#TermMax takes a different route with physical delivery. If volatility spikes or liquidity dries up, collateral can instead be delivered directly to lenders as compensation.
That gets interesting when the collateral is an RWA or another asset that isn't easy to sell quickly without taking a serious haircut.
I actually like the idea because it recognizes a problem DeFi often glosses over: liquidity isn't guaranteed just because an asset has a price.
But there's a trade-off. Receiving an illiquid asset instead of cash may protect lenders from a forced market sale, yet it also leaves them holding something they may struggle to exit.
So I'm wondering: does physical delivery make liquidation more resilient, or does it simply move the liquidity problem from the protocol to the lender? 🤔
#termmax @TermMax