Liquidation

Criteria

The LAMM protocol uses a premium model, similar to the fixed term borrowing. The liquidation criteria is that

• the interest accrued to the position surpasses the upfront premium, or

• the current time crosses 3 days after the LP reclaims the liquidity.

As long as these two conditions are not met, even if the price of a token may move in the opposite direction as your trade, the position won't be liquidated.

The interest accrual rate is pegged to the underlying AMM, more details are in the Yield section. More details for LP to reclaim the liquidity are in the Reclaim section.

Process

The frontend surfaces a liquidation page for all positions that are liquidatable or about to become liquidatable.

Anyone can be a liquidator for any liquidatable position. The liquidation reward is 5% of the position premium.

After liquidation, the LP will get the borrowed liquidity back, together with the swapping fee generated during the borrowing period. The borrower will get a PnL realized at the price point of liquidation event, minus the liquidation reward.