Liquidation

Emergency Resolution Mechanism

In situations where the rebalancing fails to execute properly, your position may reach its Liquidation threshold. At this critical juncture, the system implements a complete position closure to mitigate further risk exposure and protect protocol solvency.

Liquidation Process

The liquidation mechanism operates on similar principles as the standard rebalancing procedure, with two key distinctions:

• Complete Debt Elimination: The entirety of the debt position is burned rather than partially reduced

• Specialized Bounty Structure: The liquidation bounty isn't necessarily the same as for rebalancings

This comprehensive closure serves as the final safety measure to prevent systemic risk from cascading through the protocol.

Further Documentation

For comprehensive understanding of these crucial protocol mechanisms:

• Rebalancing Protocol: Rebalancing the Position (Liquidation Brake)

• Risk Parameters: Risk Parameters and Thresholds

The liquidation protocol represents the final safeguard in our risk management framework, ensuring protocol sustainability even during extreme market conditions.