Liquidation Auctions
Descending-price auctions among bonded specialists, opening at the conservative mark.
Liquidation is where conventional designs fail on this collateral, so Cusp clears positions through specialist auctions rather than generic keepers.
Why keeper liquidation fails here
Generic keeper liquidation assumes deep, continuous markets a bot can sell into instantly. Event collateral offers neither:
- Liquidity thins exactly when a position needs to be cleared.
- A bot that misprices the resolution takes a loss the protocol then inherits.
The work needs participants who understand the collateral.
How one auction runs
The lot opens
When a health factor falls below 1, the position is offered as a lot carrying its full risk data from the risk engine, so specialists price it correctly instead of guessing.
The price descends
A descending-price clock runs among bonded liquidators, opening at the conservative mark and falling toward a reserve that covers debt, interest, fee, and a buffer.
First acceptance settles
The first bid to accept settles atomically. Any surplus above debt and costs returns to the borrower, so liquidation recovers what it must and no more.
The price path
In one line
The auction opens at the conservative mark and walks down toward a floor that covers debt, interest, fee, and buffer. The first acceptance settles atomically, and everything above debt and costs goes back to the borrower.
The reserve price is the floor of the clock, covering debt , interest , the liquidation fee , and a buffer .
Backstop and record
If no specialist clears a lot, a backstop ladder takes over to ensure the position is resolved. Every auction, accepted or not, is written to a public liquidation log; see transparency. The clock rate and buffer sizing are in the Cusp whitepaper.