Hybrid Liquidation Model

How do liquidations work?

Hubble uses a hybrid liquidation model that relies on funds in the USDH vault, as well as on bots that facilitate market based liquidations.

USDH Vault Liquidations

Hubble's original liquidation model utilized only the USDH Vault to fund liquidations. When a position reaches a Vault's maximum LTV, the user's debt is settled via the USDH that is staked in the USDH vault. The USDH Vault stakers then receive the liquidated borrower's collateral assets at a discount, meaning that the Dollar value of the collateral received by a USDH staker will be worth more than the USDH that was burnt from their USDH Vault position. This discount would typically be around 10%.

Liquidations on the original Hubble Vault is still funded via the USDH Vault, though newly onboarded assets and vaults will be subject to market-based liquidations.

Market-based Liquidations

Going forward, any assets that are being onboarded to Hubble will be liquidated by bots on the open market. By offering liquidators a discount on collateral assets, they will be incentivized to settle the debt on loans.

In the market-based liquidation model, liquidators will receive the majority of user collateral, with the exact % depending on the vault LTV. In this model, USDH Vault stakers still receive x% of user collateral. However, this % earning is now risk free, as USDH stakers do not lose any USDH in the process.