Linear Finance
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Linear Finance

Linear Debt Terminator: Guide

Dear Linear Community,

Last week we successfully launched our latest dApp, Linear Debt Terminator. This new interface allows users to quickly liquidate marked accounts where the P-ratio has fallen below 200% for over 72 hours. This is to help safeguard Linear Finance against volatile market conditions and keep a healthy overall protocol P-ratio of 500% or above.

Debt holders whose accounts have been marked and get liquidated will incur a 15% penalty of which 10% will go to the user who liquidates the account and 5% to the marker. For more details on the general overview of the Linear Debt Terminator please have a look at this post.

If you are unsure about how the new Graphical User Interface works, please follow the step-by-step instructions below:

Step 1: Connect your wallet to Linear Debt Terminator. Make sure your wallet is on BNB Chain and that you hold both ℓUSD and BNB tokens to liquidate marked accounts and to cover gas fees respectively.

Step 2: Choose which marked account you would like to liquidate. Take into consideration if you will receive Staked LINA or Locked LINA when choosing. When you have decided, click BUYOUT.

Step 3: Define how much ℓUSD you want to liquidate. You can manually type the amount or choose the percentage of the marked account you wish to liquidate and click EXECUTE.

Step 4: Confirm the transaction on your wallet. Once your transaction has completed, your tokens will be added to the Staked LINA or Locked LINA in Buildr of the wallet you used.

Examples

Before we close this article, let us work our way through an example with some numbers.

Alice has 50,000 LINA tokens. At the time the price of LINA is $0.01, which amounts to a total of $500 worth of LINA. With $500 worth of LINA Alice can mint a maximum of $100 ℓUSD and then incurs an equal amount of debt, $100. Her P-ratio is 500 (value of collateral / value of debt).

Over the next few weeks, the price of LINA drops to $0.0035. Alice's P-ratio is now 175, below the 200 liquidation level. Alice’s account gets marked for liquidation and she now has 72 hours to restore her P-ratio back to 500 or above. Alice does not have funds to top up her collateral, LINA, nor to repay debt, ℓUSD, to restore her P-ratio in time.

After 72 hours have passed, Bob, another user on the platform, decides to repay part of Alice’s outstanding debt and liquidate Alice’s LINA tokens and thereby restoring her P-ratio to 500.

The table below shows what takes place when Alice’s account gets liquidated by Bob:

As you can see from the table above, to liquidate Alice, Bob will need to repay $84.42 of Alice’s debt. In return, Bob receives 26,530.61 LINA tokens to a value of $92.86, which includes the 10% liquidator rewards. The remainder (5%) of the liquidation penalty 1,205.94 LINA ($4.22) will be paid to the user who marked Alice’s account.

Please note that in the example above, Alice’s debt remained the same throughout, in reality, Alice’s debt will fluctuate with changes in the overall debt pool.

Partial Liquidations

For partial liquidations, LINA will be liquidated in the following order; staked LINA followed by Locked LINA. For Locked tokens, the LINA scheduled to unlock sooner will liquidate first. Once liquidated, Locked LINA will be transferred to the liquidator’s account and follow the previous owner’s unlock schedule, i.e. after one year from when the rewards were received and locked.

We hope you found this guide useful. Should you require any further assistance, please reach out to our admins on Discord, and they will answer any questions you may have.

About Linear Finance

Linear Finance is a cross-chain compatible, decentralized delta-one asset protocol that allows users to get synthetic exposure to various assets, including cryptocurrency, commodities, and market indices. Users can utilize our cross-chain swap functionality to instantly swap assets across leading blockchain environments and DeFi protocols with unlimited liquidity and zero slippage.

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Linear Finance

Linear Finance

A Decentralized Delta-One Asset Protocol with Unlimited Liquidity