Liquidations
Any keeper can close a position whose debt passes its limit, repaying the debt and taking the collateral at a small discount. A shortfall burns junior capital first.
Updated Nov 9, 2026
Liquidation reduces an unhealthy position's debt by consuming collateral. Borrowing and leverage use the same atomic flash settlement interface. A keeper can fund the purchase itself, sell the flashed collateral through an external route, or use Dusk's ordinary AMM settlement.
When a position becomes liquidatable
Borrowing health uses the collateral's linear value at the symmetric EMA, the position's stored liquidation factor, debt and applicable transfer-fee adjustments. Leverage uses symmetric-EMA equity against its stored maintenance requirement.
Removing LP liquidity alone does not make an otherwise healthy EMA-valued position liquidatable. Execution depth still affects what collateral can recover after liquidation becomes permissible.
The ordinary flow
Observe health
A keeper can simulate preview_liquidation_health before composing a fill.
Dusk checks current health again at execution; no separate observation
transaction or persistent timer is required.
Quote a permitted fill
preview_flash_liquidation returns the collateral debit and net credit,
required net payment, debt reduction, fees and resulting health. Useful
partial fills must improve health after all costs. The target is maintenance
plus two percentage points; the program decides what is permitted.
Begin, route, settle atomically
begin_flash_liquidation releases the quoted collateral and binds an exact
settle_flash_liquidation instruction later in the same transaction. The
keeper delivers the required debt-token credit to the isolated payment
vault, or uses the internal Dusk settlement. Underpayment or a missing
settlement rolls back the entire transaction.
The ordinary buyer discount is 0.5%–5%, determined by current health deterioration. An affordable partial fill may use a smaller discount when the larger amount would worsen health. Keepers see the actual discount in the quote; elapsed time does not increase the discount.
There is no five-minute liquidation auction, mandatory waiting period, or automatic transaction execution. Keepers still have to act. The protocol's separate revenue auctions remain auctions.
Emergency settlement
preview_emergency_liquidation and emergency_liquidation provide the internal fallback when EMA equity is at or below 70% of maintenance. With 7% maintenance, that boundary is 4.9% equity. Time alone does not unlock it.
The internal unwind uses EMA price and smoothed depth, including the concentrated curve and hLP accounting. It receives collateral into the market's reserves and accounts for the resulting debt reduction. It does not price that internal unwind from the immediately manipulable live spot reserves.
This changes execution accounting, not V2's health trigger; it does not remove sustained price-manipulation or inventory risk.
Partial recovery remains available. Inside the emergency boundary, a full internal close is permitted when no internal partial can restore the recovery target, even if a smaller partial would improve health. A full close can therefore be allowed while a better external route exists.
The on-chain preview is authoritative; a keeper failing to find a partial route is not proof that a full close is allowed.
The emergency caller reward progresses with current health from 0.3% to 1%, capped at 1% of proceeds. It also applies during insolvency. There is no time-based incentive ramp.
The normal configured swap fees remain part of internal execution.
Charges and loss allocation
| Amount | Treatment |
|---|---|
| Ordinary buyer incentive | Quoted collateral discount, up to the health-based maximum |
| Emergency caller reward | Bounded share of actual proceeds, capped at 1% |
| Solvent liquidation charge | Fixed 300 bps of net debt repaid; applies only when solvent settlement can fund it; 20% to the protocol, the rest to the junior tranche |
| Owner remainder | Returned to an owner-controlled debt-token account on full settlement; unconsumed collateral remains in a partial position |
The solvent charge is an additional cost paid from collateral/proceeds. It is not taken out of the quoted debt reduction. It must fit the partial health-improvement checks or the available full-settlement surplus; loss write-off does not fund it.
Recovery protects principal first. Any funded principal shortfall is allocated to Junior LP up to its entire backing, then to senior srLP for the remainder. See Senior and junior tranches.
Unpaid interest is cancelled without creating interest revenue or referral fees. Terminal hLP closeout uses the same junior-first then senior funded-loss order.
Mutable transfer fees need timely keepers
Dusk supports admitted Token-2022 mints whose transfer-fee authority remains active.
New risk immediately uses the worse net credit of the effective and announced schedules. Liquidation health considers the pending schedule in its final notice epoch, one epoch before activation. Actual token transfers keep using the effective schedule until activation.
Keepers must poll both mint state and Clock, recheck every affected position, and refresh before submission.
Epoch rollover can change risk without a mint or market write. A changed schedule, cancellation or rescheduling also invalidates an old quote. This provides a notice-period mitigation, not a guarantee of timely liquidation or protection from a confiscatory fee after activation.
See keeper implementation, operator checks, and instruction reference.