Give Borrowers a chance to redeem their liquidations, while still incentivizing liquidators

[bitn8]

@paletas

The 10 min activation period is for new bids, ongoing bids will just trigger and this is a good thing for the protocol, the longer a defaulted loan is left unchecked the higher the risk for the protocol

Agreed.

I think it’s worth exploring the Nexus aUST model. Creating an Anchor liquidation vault where users can deposit UST. Anchor would take a fee on this yield to pay for the protection which helps buffer the yield reserve. However, the major limitation is aUST-UST spread can be wide, even wider in times of high VOL when shit his the fan. On market orders with wide markets, users could lose more on the spread than if they got liquidated. I am confident this changes as more arb and volume on Dexs solve this.

@PFC had this idea:

@PFC

What if Anchor charged a bit of a higher rate, but it stopped liquidations from occurring for say X minutes/hours? say 1% for 10-minutes, and 5% for 1-hour, and 15% for 6-hours (making the numbers up obviously. I’m not a quant).

This would give the end-user a chance to liquidate other holdings, and fix their LTV, as well as reduce some of the bumpiness (like the $9 drop that happened, which quickly recovered a bit).

This helps create a more dynamic buffer but also has to be modeled a bit to make sure collateral ratios are right.

@Mr_Domore

Create a notification mechanism to the Borrower as soon as a liquidator submits a bid on Borrower’s collateral

This possibly could be redundant? The function of LTV level notifications exists. If you are getting those, you should assume you’re about to be liquidated.