Liquidation Auction Process

Liquidation Auction Process

When a user places a bid equal to the amount of the remaining balance owed on the Advance that is eligible for liquidation, a 24 hour Liquidation Auction will commence and users can bid to ultimately take ownership of the HEX stake that was used as collateral by the user who failed to repay their Advance on time.

*When a bid is placed by a user, the total amount of the HDRN used to bid will be burned.

*When a subsequent bid is placed and a user it outbid, the new winning bid amount of HDRN will be burned and the original bid amount will be re-minted and returned to the user who was outbid.

*If a bid is made within the last 5 minutes of the Liquidation Auction, the time remaining on the auction will be adjusted to end 5 minutes after that bid is made.

Detailed Example:

Step 1: User (a) Borrows 555,500 HDRN with a 1.64% fixed premium rate while using their HEX stake as collateral, with the requirement to repay over the period of the stake length (divided into 30 day payment windows). User (a) ultimately fails to make any repayment and once 90 consecutive days have elapsed their Advance becomes eligible for liquidation by other users.

Step 2: User (b) decides to make the first bid which has to be equal to the remaining balance originally owed by user (a) (555,500 principal + 147.85 premium). The 555,647.95 HDRN user (b) uses to place the bid is then burned and a 24 hour Liquidation Auction commences. Other users are now able to place bids that are greater than the value of the previous leading bids.

Step 3: User (c) places the second bid of 560,000 HDRN, which is burned and the 555,67.95 HDRN user (b) placed a bid with is subsequently re-minted and given back to user (b) who has now been outbid. The new leading bid is 560,000 HDRN placed by user (c).

Step 4: In the last 5 minutes of the 24 hour Liquidation Auction, with 2 minutes remaining on the timer, user (d) places the third bid of 600,000 HDRN which is burned and the 560,000 HDRN user (c) placed is subsequently re-minted and given back to user (c). Since the third bid has been made within the last 5 minutes, time has now been added to the 24 hour Liquidation Auction and the timer is adjusted to end 5 minutes from the point that the third bid was placed.

Step 5: No more bids are made and the Liquidation Auction ultimately ends after 24 hours and 3 minutes of bidding. The winning bid is 600,000 HDRN. User (d) can now exit the Liquidation Auction and ownership of the HEX stake that was used as collateral for the Advance taken by user (a) is now transferred to user (d) who won the Auction.

Note: Once an HSI has been won in a Liquidation Auction, it will no longer owe any Advance repayments since the outstanding balance of the previous Advance would have been cleared with the winning auction bid. The winner of the Liquidation Auction will then be free to Mint and/or take a new Advance against that HSI if they choose.