Docs · Loan lifecycle
Liquidation & recovery
The pending window, what a liquidation transfers, and recovery.
When the mark falls to a funded tick, the loans drawn against that depth enter pending liquidation. Nothing is sold — there is no auction, no keeper race, no slippage cascade. The state machine is:
ACTIVE ── mark reaches tick ──▶ PENDING (window = pending param)
PENDING ── price recovers in window ──▶ ACTIVE // right returns
PENDING ── move holds through window ──▶ TITLE // lender takes the asset
- Pending — the borrower’s right to the collateral is held, not sold. The position is frozen against the committed price.
- Recovery — if the mark recovers within the window, the right returns to the borrower and the loan continues unchanged.
- Title transfer — if the move persists, the lender receives the collateral at the price they committed to. No forced sale means no fire-sale externality for the rest of the market.
A healthy market therefore needs a dependable way for a lender to exit an acquired asset. There are two:
- Redeem at intrinsic value — Hold the asset and redeem it for what it is worth — RWAs, LSTs, veNFTs. No buyer has to show up.
- Sell into a deep market — Sell into existing depth — WETH, BTC, and other liquid assets. The exit is the market that was already there.