Improvement on Liquidation Protection

BIP Drafts
#1

Summary
This proposal is proposed that if the borrower repays some loan debt to make health factor bigger than 1.1, the liquidation stops automatically and the borrower pays a penalty of a 2% of the debt to the liquidator.

Background
BendDAO is a peer-to-pool model NFT lending platform, and the Protocol uses the over-collateralization method to provide services to both lenders and borrowers.

When a liquidation occurs, the borrower must repay some loan debts (50% in default) as well as pay a penalty of a maximum(5% of the debt, 0.2 ETH) to the liquidator, even after NFT floor prices recover to the normal price. This is unfair to the borrowers.

Proposal
It is proposed that if the borrower repays some loan debt to make health factor bigger than 1.1, the liquidation stops automatically and the borrower pays a penalty of a 2% of the debt to the liquidator.
Take BAYC as example, the current floor price is around 60e, a 0.1 surplus of the health factor, about 6e, is enough to cover possible losses in one day, which will allow more time for borrowers to transfer funds to repay the existing debts.

  • I prefer to health factor option
  • No, make no changes
  • Yes, borrowers only need to repay at least 10% debts
  • Yes, borrowers only need to repay at least 20% debts
  • Yes, borrowers only need to repay at least 30% debts
  • Yes, borrowers only need to repay at least 40% debts

0 voters

  • I prefer to percent repayment option
  • No, make no changes
  • Yes, borrowers only need to maintain a health factor bigger than 1.1
  • Yes, borrowers only need to maintain a health factor bigger than 1.2
  • Yes, borrowers only need to maintain a health factor bigger than 1.3
  • Yes, borrowers only need to maintain a health factor bigger than 1.4

0 voters

  • No, make no changes
  • Yes, extend the liquidation auction period to 18 hours
  • Yes, extend the liquidation auction period to 24 hours

0 voters

#2

Maybe ignore the floor price from listing rewarding marketplace is a good way to improve?

#3

I figured out that it won’t help.
Marketplace like looksrare listing rewards will make the floor price drops on looksrare, and that will
make opensea floor price drops too, so no need to care about the listing rewards anymore.

#4

50% repayment when auction maybe too high, can make a proposal to vote it to like 20%, 30%, 40% 50%?

1 Like
#7

I believe that to maintain the health factor to 1.1 or 1.2 is more reasonable than to repay 10% or 20% of the debt as we see floor price will rebound soon in recent floor price manipulations.