SCCP-260: Update Synthetix Liquidation Parameters
| Author | |
|---|---|
| Status | Implemented | 
| Type | Governance | 
| Network | Ethereum & Optimism | 
| Implementor | TBD | 
| Release | TBD | 
| Proposal | Loading status... | 
| Created | 2022-12-07 | 
Simple Summary
This SCCP proposes to implement the following:
- increase the 
liquidationRatiofrom 145% to 175% - increase the 
snxLiquidationPenaltyfrom 45% to 75% - increase the 
selfLiquidationPenaltyfrom 40% to 70% 
Abstract
liquidationRatiois the ratio below which stakers can be flagged for liquidation, after theliquidationDelayof 8 hours,the flagged staker is liquidated.liquidationPenaltyis the penalty paid to other stakers who take on the debt of the liquidated account.selfLiquidationPenaltyis the penalty paid to other stakers, when a staker liquidates his debt to the target collateralization ratio.
Motivation
The motivation for pushing up these parameters are as follows:
- 1-Year short funding rates on SNX has been been historically around 75%. If a staker who earns liquidation rewards and wants to hedge his escrow, he can't sell it and has to pay an 75% funding rate. So a penalty of 75% would bring the net present value of the debt assumed in line with that of liquidation rewards.
 - Increases the incentive on stakers to repay their debt.
 - Increases the incentive for stakers to bring additional capital into the system to take on the liquidated snx of fallen brothers.
 
Copyright
Copyright and related rights waived via CC0.