🔃Recovery / Liquidation
Targeting 90% Borrower Recovery while Protecting Protocol Solvency
The dual goal of the recovery process is to protect protocol solvency while ensuring the maximum recovery possible for the owner of the underlying collateral.
Recovery Triggers
FluidNFT's recovery process relies on third parties, acting in their own self-interest, to trigger recoveries on defaulted loans. Their incentive being 1% of the auction price.
Fixed-Term Loans
Fixed-term loan recoveries may be triggered if & when a borrower fails to repay an outstanding loan before the end of the grace period.
Open-Ended Loans
Open-Ended loan recoveries may be triggered if & when a borrower's loan becomes undercollateralised.
Recovery Process
Step-By-Step
90% Borrower Recovery
To compensate for the collateral loss, and as insurance against losing significant value as a result of interacting with the FluidNFT protocol: all auction proceeds minus the outstanding loan balance and a liquidation fee go to the original owner.
In a fair and liquid market, with a 10% liquidation fee (for example), this should equate to the borrower effectively selling their NFT for 10% below market value, rather than a complete loss.
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