Auction
Last updated
Last updated
To ensure that all $sUSD supplies are fully backed by collateral, vaults below the liquidation threshold will be liquidated. Anyone can participate in the liquidation of these positions. During liquidation, the liquidator pays off the debt and recovers the collateral assets, with the difference between the market value of the collateral and the debt serving as the liquidator's profit. For example, consider a loan with 30 $ORDI tokens as collateral to borrow 600 $sUSD. The main steps of the liquidation process for this position include:
When the asset price falls below $28.5, the LTV (Loan-to-Value ratio) drops below 80%, reaching the liquidation threshold and entering a state of liquidation.
For the current collateral valued at $855, a 48-hour Dutch auction will be initiated. Bidders need to use $sUSD to bid for the asset to be liquidated, starting at 855 $sUSD and ending at 600 $sUSD, with the auction price decreasing linearly over time.
The liquidator settles the bid at 700 $sUSD during the Dutch auction. After deducting the required repayment of 600 $sUSD, Shell Finance allocates the remaining 100 $sUSD to the insurance fund.
After the liquidation, Shell Finance reviews the transaction details of the liquidator and adds the collateral assets to the PSBT, allowing the liquidator to acquire 30 Ordi collateral from the vault.
Shell Finance triggers the oracle to reveal the "Secret," a secret value that completes the signatures of the participants (borrower and protocol) to execute the transfer of collateral from the vault to the liquidator’s address. Concurrently, the oracle automatically terminates the corresponding DLC process.
In Shell Finance, when users initiate a borrowing transaction, they are required to select a “Term,” which defines the loan duration. The Term specifies the period for which the borrowed funds are utilized. Shell Finance calculates the Interest Fee based on the selected Term and the Borrow APY of the collateralized assets.
Beyond calculating the Interest Fee, Shell Finance incorporates an HTLC (Hash TimeLock Contract) within the BTC script for the user’s borrowing position. When the loan Term expires, a 24-hour grace period is provided. During this buffer period, users can repay their loans and reclaim their collateralized assets.
If the user fails to repay the loan within the 24-hour grace period, the collateralized assets will transition into “Maturity Liquidation.” This process is similar to regular Liquidation, where the collateral will be listed on the Auction page. Liquidators can bid on the collateral, repay the sUSD debt to the system, and claim the collateralized assets as their reward.
