Liquidation Mechanism

Hi guys,
ufnortunately i got liquidated today. But my collateral wasnt sold but it was just taken away. This is not how a liquidation works. You need to sell my collateral with a penality fee and the rest has to be returned. Literally all the collateral was taken and I have no idea what happend. Can Please someone help?

And if the penalty fee really is that you loose all your collateral this has to be clearly displayed! On top of that would such a high penalty fee be totally unreasonable.


Same here. This is a flaw in the DAO. It doesn’t make any sense the DAO just takes the collateral.

Sell to cover my loan and take a penalty and give back the result of the ICX.

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All we have to do is copy anchor on terra luna and add more collateral types like eth, etc.

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Currently, as you mentioned, all collateral is swept to the Emergency Reserve Fund.

Imo, that is too aggressive primarily because of the liquidation ratio of 67% LTV. From a development standpoint, it would be easier to raise liquidation LTV to 90%, for example, rather than change the liquidation mechanism. This way the implied fee is 10%, similar to other networks I believe.

As for next steps, all funds that were lost during the liquidation process are currently held on a Balanced smart contract called the emergency reserve. If any of you would like, I think a good next step would be to create a separate thread about returning the excess collateral that was liquidated. It would take two votes imo:

1.) A Text Proposal to agree on the terms of the refund

2.) Move the sICX from the Emergency Reserve into a separate contract where users can claim the sICX

So going back to next steps, I’d recommend starting a thread to discuss the first vote above.


So the ICX doesnt even get sold?
Right now this would be a penalty fee of 33%.
I understand that establishing such a bidding liqudiation is complex but its the way to go. Before setting up the infrastucuture you can just let the dao to the liquidation. But than it has to be clearly displayed that there is a 10% penality fee.
For the future you could even think about making a new liquidation protocol that can be used all over icon with its own token. Similar to this on luna: Or you use baln and increase its utility.

Since the collateral wasnt sold its hard to determine the refund. How about changing the liquidation ration retrospectively to 90% with a 10% penality fee.

But I have to say that the reason why you liquiate earlier is just to have more certainty that you can cover the loan in case there happens a fast crash. But if the dao isnt selling the collateral this shouldnt be a problem.

I was under the impression the high implied penalty fee was as protection for the DAO exactly because it didn’t/couldn’t sell the collateral straight away so was a defensive buffer.

I’m not arguing against any of the proposed changes or ideas at all, just wondering if there is something else we need to improve as well. The risk if any, to the DAO is still present at 10% or 33% or almost any other number to varying degrees.

That’s correct, that’s the reason.

The current mechanism is to trigger a liquidation (small bonus) then payoff the bad debt for up to a 10% bonus. This seems to happen quite quickly given the high incentive, and even with our relatively small community, so I think that lowering the buffer to the DAO is a fine solution., a protocol with similar rules to Balanced and a stablecoin called LUSD, has a 90% LTV liquidation point. That’s as far as I’d be willing to go, but also open to a smaller increase in liquidation LTV.

If we go with 90%, that’s an implied 10% fee by Balanced and there would be no need to add more logic to refund the remaining collateral to the liquidated borrower. That’s the primary appeal to me. We could change this through governance with no added development


Transparency is everything. I understand that the flat 10% penalty fee (which is still rather high) is the easiest solution for now but with more adopting we have to aim for the bidding solution. But the penalty has to be displayed as a warning and ideally we shouldnt lilquidate everyhting but only so much that the ratio goes back to like say 50%.

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My liquidation hit but they increased my loan from 80k to 105k without my permission just bringing up my liquidation price making it hit! Completely in acceptable abs they need to refund people!

Hi there,

Just like many other I got liquidated, ALL of my ICX gona. I was a big fan of ICX, a big part of my life savings were inside. I’m really devasted.

But the way the system workes it’s not really correct, I had MORE than enough ICX to repay my loan, I wanted to do it for a long time already, but I couldn’t because I was in the zone where all my collateral got locked. I wanted to get rid of the loan for a longer time already but I couldn’t, and now this happened.

Please this can’t be happing, my wallet is completely empty… I’m devastated…
Can someone tell me in short steps what we (I want to gather a little community with thie problem) can do or who we can contact to find a solution.

I’m wrecked, and scared, and I think I’m not the only one.


In my opinion nobody should be reimbursed if they got liquidated. I took steps to make sure that didn’t happen by selling other assets to repay a big portion of my loan. I seen the way the market was moving and didn’t want to take the risk.

Everybody that took out a loan against such a volatile assets should have know the risk involved. What about those individuals that sold at a loss to repay their loan? Are they going to get reimbursed too?

This is just a part of crypto DAO. There are risks involved and when those risks become realized, it’s nobodies fault but your own

Just to be clear, it’s not reimbursing what was liquidated, it’s returning any of the excess collateral, that Balanced currently holds, from after their debt is repaid


That’s not liquidation. They shouldn’t be messing around with DAO if they aren’t watching the market. There are risks involved but also rewards. They took on too much risk with the amount of their loans by trying to maximize their rewards and wound up being liquidated. No reimbursement should be given at all

I watch my position daily and knew the risk involved. I was reducing debt for all my wallets to a level where I felt I had time if needed. There were other factors involved like having liquidity on other chains in which I couldn’t move due to network issues. I lend and borrow on several different chains and balanced is the only one so far in which liquidation happened. I like Scott’s idea of removing the locked collateral restriction which is currently present on other Anchor protocol, Giest, and Benqi. This has helped me reduced my risk tremendously to avoid liquidation. All my ICX holding got liquidated because there were a lot of outlying factors that prevented me from paying. With that being said I think that excess collateral should in part be repaid, how much of the % I’m not sure. There are a lot of long time holders & supporters who are in the same situation as I am. I want the DAO to continue to strive so I’m not selling my staked BALN to continue to vote to help the project/community despite my circumstances.


The proposals to make the peg more elastic and the liquidation level lower seem like excellent ideas, and great for the protocol going forward. Im am currently being rebalanced into liquidation and watching the protocol increase my loan through rebalancing, pushing me closer to liquidation seems like something that needs fixing. Is it possible to stop the rebalancing once a position becomes locked?

You have to add BNUSD and then pay back portions of your loan to go further away from liquidation. You can’t just bring the curser back you have to have BNUSD in your wallet to trade!

But what about your liquidation price moving higher and higher?

I understand the liquidation and how it works but when it raises from 0.55 to 0.65 I didn’t even have time to move any assets to repay the loan because it just kept creeping up and increasing my loan also!

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I saw many people’s opinions and I was liquidated this time. I think that forcibly increasing loans for bnusd’s pegging eventually kills users. At least users with locked icx do not receive compensation, so rebalancing to pay back the loan is possible, but conversely, I think we should prevent the loan from increasing. It is bound to be a vicious cycle of kicking out users. I have been using Balance since the beginning and have seen many users leave because of rebalancing. With the reverse rebalancing this time, my liquidator continued to rise and I kept putting money in to prevent it, but I couldn’t. The team needs to think more carefully about this issue unless it wants all users to leave.


Can someone explain what it means that loans can be liquidated with a penalty fee of up to 10%? How is an amount of up to 10% determined?