BIP#6 - Optimize Liquidation Mechanism

Final BIPs
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#1

Summary

In order to better motivate liquidators to actively participate in the liquidation of unhealthy debts, the current liquidation mechanism needs to be optimized.

Motivation

When the NFT market price fluctuates, some NFT assets will become insolvent, that is, the debt is higher than the asset value. Liquidating these debts in time will help maintain the overall security of the platform.

Proposal

  1. The bid penalty fine should only be paid to the first bidder. The current fine is paid to the highest bidder. In fact, the first auctioneer took the greatest risk and made the greatest contribution to the platform’s timely recovery of debts. Subsequent auctions are just normal market bidding behaviors.

  2. The bid fine should only be based on debt. The current fine is based on the auction price, which is unpredictable and encourages malicious auctions, that is, only participating in the auction at the last moment for the sake of fines.

  3. The bid fine ratio needs to be increased to more than 3% and it must be greater than the minimum value of 0.2 ETH. The current fine ratio is 1%, which is not enough to attract liquidation auctioneers.

Period
The polling process begins now and will end at 15:59 UTC on 2022-05-18.
After this, a Snapshot vote will be put up at 12:00 UTC on 2022-05-19.

  • Bid Fine Ratio: 3%
  • Bid Fine Ratio: 5%
  • Bid Fine Ratio: 8%
  • Bid Fine Ratio: 10%

0 voters

  • Minimum Bid Fine: 0.2 ETH
  • Minimum Bid Fine: 0.3 ETH
  • Minimum Bid Fine: 0.5 ETH

0 voters

3 Likes
#2

this change would make the pool ETH depositor more safer.

NFT holders should repay some money back if the HF is under 1.5 to avoid pay 0.x to the first bidder.

1 Like
#3

Suggested that Minbid be decoupled from FL and only related to debt,

Because the initial goal of the auction is to recover debt for the platform, the value of the NFT is realized by the later auction.

The recommended starting price is 95% of the debt

#4

I wonder if the bid penalty fine is paid to the first bidder would this cause sophisticated actors to attempt to front run consumer liquidators?

If somebody is running a bot monitoring pending txns for a first bid, they can front run and potentially get the bid fine; and if the next bid immediately comes in out bidding the front running txn, the bot runner “extracted the bid fine from the consumer”.

Not to say this is a “bad” thing; could even be good as their would be a time incentive to attempt to initiate auctions. Just wondering what potential fallout there can be.

#5

a little late to this discussion but glad to see the team & community being proactive with solutions, this is a difficult problem to solve, excited to see how it evolves over time.

#6

yes, it is now. The first bid should be (debt + interests).

#7

It’s like MEV for AMM, it’s from ETH system instead of BendDAO, nothing we can do about it and I think that we should not care about it.