Liquidation

Unleash Protocol introduces a comprehensive liquidation framework tailored to maintain the protocol’s stability and protect the interests of its participants. This framework is designed to offer a balanced and flexible approach to risk management, ensuring the protocol’s resilience and fostering a secure IPFi on Story Protocol.

Dynamic Liquidation Premium

• Health Factor Dependency: The liquidation premium is directly linked to the health factor of positions, with those nearing a health factor of 1 prioritized for liquidation. This mechanism ensures efficient asset management and promotes a stable lending environment.

• Premium Influencing Factors: The calculation of the liquidation premium considers the liquidity and volatility of the involved assets, optimizing the process and minimizing undue stress on the protocol's liquidity pools.

Flexible Liquidation Options

To ensure fairness and transparency in the liquidation process, liquidators are afforded the flexibility to choose the borrowed tokens they wish to repay as well as the collateral tokens they prefer to receive, inclusive of the liquidation premium. This strategy not only empowers liquidators with choices to mitigate their risks but also aligns with our goal of minimal liquidation impacts.

Protocol Governance and Adaptability

The parameters governing Unleash Protocol’s liquidation mechanism, such as premium calculations and health factor thresholds, are controlled by upgradable smart contracts. This adaptability ensures the protocol can dynamically respond to evolving market conditions and community feedback. Over time, governance will progressively shift towards a decentralized model, empowering token holders to influence critical decisions, including adjustments to the liquidation framework.

Unleash Protocol's liquidation framework is a testament to our dedication to maintaining a balanced, secure, and responsive IPFi environment. By implementing these mechanisms, we aim to protect the protocol's liquidity while offering a fair and efficient system for managing risk, reinforcing our commitment to the sustainability and growth of the IPFi ecosystem on the Story Protocol platform.