Liquidation
The threshold is fixed by your tier and never moves. What triggers a sale, how much of your position it takes, what it costs you, and the four things that are true whatever happens.
Spec v0.9.1, reviewed 2026-09-08
If your collateral ratio falls under the threshold of your tier, part of your position is sold to repay part of your debt, and the buyer keeps a discount. You lose that collateral for good.
The threshold
| Tier | What it holds | Threshold |
|---|---|---|
| 1 | SPY, QQQ, VTI, GLD | 115% |
| 2 | AAPL, MSFT, GOOGL, AMZN, META, NVDA, SLV, AVGO, AMD, CSCO, LLY, XOM | 122% |
| 3 | TSLA, PLTR, COIN, NFLX | 140% |
Guarantee
The threshold is a constant of the branch, written in at deployment. It is the same at every hour of every day, weekends and holidays included. It does not move when the protocol trusts the price less, it does not move when the stock becomes volatile, and no key and no vote can change it.
Rules R-6.1.3, R-19.16.4, R-15.2.1 (2)
What triggers a sale
Two steps, both public, both by anyone.
- Flag. Someone observes that your ratio, measured on the liquidation price, is under the threshold, and flags your position. Flagging is only possible while the branch can actually liquidate, so never on a frozen or halted price.
- Liquidate. After 90 seconds and within 1800 seconds, the same or another party executes. The condition is checked again at execution: if your ratio came back above the threshold in the meantime, nothing happens, and any operation of yours that fixed the ratio clears the flag.
The ninety seconds are the only warning the protocol gives, and an interface is required to notify you the moment a flag is set.
Two things invalidate every flag on a branch at once, with no iteration: entering HALT, and any freeze of the price that lasted 600 seconds or more. The price that justified them no longer exists.
Rules R-6.1.1, R-6.1.2
How much is taken
Not all of it, unless the position is far gone. The amount is whatever brings your ratio back to a target above the threshold.
Close factor
debt taken = (target × debt − collateral × price) ÷ (target − 1 − bonus)
target = 121% on tier 1, 128.8% on tier 2, 148.3% on tier 3
The whole position is taken instead when the ratio is under 105%, when the computation would take everything anyway, or when what would be left is under 1,000 fyUSD. After a partial liquidation your ratio is strictly better than before, and never worse.
Worked through, tier 1. You hold 10 SPY and owe 6,800 fyUSD. The composite reads 771.20, so your ratio is 113.4%, under the 115% threshold. The liquidation takes 3,000 fyUSD of debt and 4.04 SPY, of which 0.020 SPY goes to whoever did the work. You are left owing 3,800 fyUSD against 5.96 SPY, a ratio of 121%.
Rules R-6.3.1, R-6.3.2, R-6.3.4
What it costs you
Two things come off the collateral seized.
The bonus. The buyer pays less than the market for the collateral: 2% to 4% on tier 1, 2.5% to 5% on tier 2, 3% to 6% on tier 3. It is at the low end when the price is degraded and at the high end when every source agrees, and it rises by one or two points when the seizure is large against the depth of the market. It never exceeds 8% on tier 1.
The keeper share. 0.5% of the collateral seized, capped at $200, paid to whoever sent the transaction. It comes out of the same seizure, not on top of it.
There is no other liquidation fee. Collateral seized in excess of what the debt and the bonus required is credited to you and can be claimed at any time.
Rules R-6.4.1, R-6.4.2, R-6.2.3
Who buys
The Stability Pool of your branch, first and by default. It burns fyUSD against your debt and takes the collateral. That is why the pool exists and why its depositors are paid.
If the pool is not deep enough, a second step lets anyone bring their own fyUSD and take the same seizure at the same discount, up to an hourly ceiling of 1.0× times the measured exit depth and 0.25× of it per transaction.
If neither covers it and your ratio is under 100%, what is left of your collateral goes to the protocol's reserve and the remaining debt is recorded as bad debt. That is a loss for the protocol, not an additional charge on you: your position is closed at that point.
Rules R-6.2.1, R-6.3.3
The four things that are true whatever happens
Guarantee
- The threshold is your tier's, always.
- It is measured on the median of markets that actually traded at that instant — the pools on Robinhood Chain, signed index and perpetual feeds, twin-token markets — signed by at least two independent infrastructures. Never on one market, never on one infrastructure, never on yesterday's close.
- With only two sources answering, nobody liquidates you more than 3% to 8% below the last exchange print. With fewer, or when one infrastructure is alone, nobody liquidates you at all.
- When a price returns after a freeze, the Stability Pool executes nothing for 600 seconds.
Rule R-6.6.4
There is no ratio that is out of reach. A position sitting a point and a half above the threshold can be liquidated on a Saturday if three markets fall together by that much. What the protocol promises is the price it uses, not a period of immunity.
What a weekend actually looks like
Nothing special. On a measured Saturday morning, SPY carried seven live sources across three families with 0.26% of dispersion; the branch was in its full regime, the bonus was 3.8%, and a position that had drifted under 115% was flagged at 08:16 and liquidated ninety seconds later at the median of seven markets that had traded thirteen thousand times since Friday evening.
A crash is absorbed as it happens rather than in one block. During a 20% fall spread over two hours, positions cross the threshold in waves and each is brought back to 121%, on the successive prices, in tranches of a few minutes. The pool buys all the way down at the market of the moment. What it does not do is wait and then buy everything at once at the bottom.
Rules R-6.3.3, §14.2, §14.3
Where the loss can land on somebody else
Risk
A position sitting exactly at its threshold stops covering its own debt if the price falls more than 8.7% (tier 1), 12.7% (tier 2) or 22.9% (tier 3) between two moments the protocol can act, which is a few minutes apart. Beyond that, the Stability Pool pays more than the collateral is worth. On an index in a continuous session that has never happened. On a stock with an earnings date it happens once or twice a year, and the mega caps are included.
Rules R-6.1.3, R-15.4.1 (12)
That is the depositor's risk, not the borrower's, and it is described from the depositor's side on Earn and in Liquidation and bad debt.
How to avoid one
Deposit more collateral, or repay. Both are available in every state, at every hour, and neither reads a price. An interface will show you the exact amount of each that brings you back to a ratio you choose.
The borrowing limit of the day is also, indirectly, protection: a position opened on a volatile day is opened further from the threshold. A Nvidia position opened at 72.8% rather than 75% tolerates a fall several points larger before anything happens.
Manage your position
Add collateral, repay, borrow more, withdraw, change your rate, close, claim a surplus — which of these can never be blocked, and which depend on the state of the branch.
Interest rate and delegation
You pick the rate you pay. What the floor is and where it comes from, what a change costs, what a low rate buys and what it exposes you to, and how to hand the choice to someone else.