@TermMax I used to treat liquidation mechanisms as a footnote - the assumption that a DEX auction always clears bad debt. Looking closer at TermMax's Gearing Token design, the physical delivery option changes that assumption in a way that matters more than the leverage itself. Instead of relying purely on an on-chain auction when collateral value drops, TermMax gives lenders the right to receive the underlying collateral directly. That's a settlement guarantee, not just a backstop.
The behavioral effect is subtle: lenders don't have to price in auction slippage risk the same way, because the worst case isn't "the auction fails to clear" but "I hold the collateral asset itself." That changes what collateral types can realistically be listed - including lower-liquidity assets that would be too risky to liquidate through an auction alone.
The risk is that physical delivery only works if lenders are willing and able to hold the delivered asset, which isn't universal across institutional or automated vault strategies.
What I'd watch is which collateral types curators actually accept over time - that tells you whether the settlement guarantee is trusted enough to expand the collateral set, not just theoretical.
Settlement quality determines what a market is allowed to collateralize.
#termmax @TermMax $RED $STAR $GPS
The behavioral effect is subtle: lenders don't have to price in auction slippage risk the same way, because the worst case isn't "the auction fails to clear" but "I hold the collateral asset itself." That changes what collateral types can realistically be listed - including lower-liquidity assets that would be too risky to liquidate through an auction alone.
The risk is that physical delivery only works if lenders are willing and able to hold the delivered asset, which isn't universal across institutional or automated vault strategies.
What I'd watch is which collateral types curators actually accept over time - that tells you whether the settlement guarantee is trusted enough to expand the collateral set, not just theoretical.
Settlement quality determines what a market is allowed to collateralize.
#termmax @TermMax $RED $STAR $GPS