# 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.