Liquidations
When Leverage Goes Wrong (But Not Too Wrong)
Most protocols liquidate everything when you cross the line. Position worth $10,000? Debt at $9,001? They take it all. You get nothing.
Ripe takes only what's needed. Your position hits the danger zone? The protocol uses your own sGREEN first, then takes just enough collateral to restore health. You keep the rest.
Four layers of protection. Partial liquidations only. Your own assets used first. This isn't charity — it's math. Keeping borrowers alive keeps the protocol healthy.
Executive Summary
Key Points:
🛡️ Four defense layers: Redemption buffer → Your own assets → Stability pools → Dutch auctions
📊 Partial only: Liquidates just enough to restore health, not entire position
💰 Fair pricing: 5-15% liquidation fees
⚡ Automated: Keeper network ensures rapid execution
🎯 Your assets first: Uses your stability pool deposits and stablecoins with no penalties
Quick Visual: The Liquidation Flow
Your Position Becomes Unhealthy
↓
REDEMPTION ZONE (First)
└─ GREEN holders can redeem
at $1 (no penalty for you)
↓
LIQUIDATION TRIGGERED
↓
┌───────────────────────────────┐
│ PHASE 1: Your Own Assets │
│ • Your sGREEN in pools │
│ • Your GREEN LP in pools │
│ • Your stablecoin deposits │
└────────────┬──────────────────┘
↓ (if needed)
┌───────────────────────────┐
│ PHASE 2: Stability Pool │
│ • Instant swaps │
│ • 5-15% discount only │
└────────────┬──────────────┘
↓ (if needed)
┌───────────────────────────┐
│ PHASE 3: Dutch Auction │
│ • Public sale │
│ • Increasing discounts │
└───────────────────────────┘What This Means For You:
✅ Multiple chances to avoid liquidation
✅ Keep most of your collateral
✅ Lower fees than other protocols
✅ No cascade liquidations
✅ Fair, transparent process
Quick Navigation
Understanding the Basics:
Why Liquidations Matter - Protocol safety and borrower protection
Risk Zones - Three thresholds and visual guide
Redemption Buffer - Your first line of defense
The Liquidation Process:
Phase 1: Own Assets - GREEN/sGREEN burning
Phase 2: Stability Pools - Instant liquidity
Phase 3: Dutch Auctions - Time-based discounts
Advanced Topics:
Liquidation Economics - Fees and calculations
Keeper Network - Automated execution
Common Scenarios - Real-world examples
Bad Debt Handling - Last resort measures
Why Liquidations Matter
Protecting Protocol Solvency
Liquidations serve as the critical mechanism ensuring that GREEN remains fully backed. When borrowing positions become undercollateralized due to collateral value drops or accumulated interest, the protocol must act to prevent bad debt accumulation. Without effective liquidations, GREEN could lose its peg, affecting GREEN and sGREEN holders.
The Borrower-Friendly Approach
Unlike traditional DeFi protocols that liquidate entire positions at once, Ripe only liquidates the minimum necessary to restore healthy collateralization. This approach:
Preserves User Value: Keep as much collateral as possible
Reduces Market Impact: Smaller liquidations mean less selling pressure
Enables Recovery: Partial liquidations allow positions to potentially recover
Maintains Fairness: Fixed fees rather than arbitrary penalties
Understanding the Risk Zones
The Three Critical Thresholds
Your position's safety depends on three key thresholds that work together to create graduated risk zones:
1. Maximum LTV (Loan-to-Value)
Your borrowing limit as a percentage of collateral
Example: 70% LTV on $10,000 = $7,000 maximum borrow
Cannot borrow more once reached
2. Redemption Threshold
Early warning system before liquidation
GREEN holders can redeem against your position
Provides market-based deleveraging opportunity
Example: At 80% threshold, others can swap GREEN for your collateral at par
3. Liquidation Threshold
The danger zone where forced liquidation begins
Calculated as minimum collateral needed for your debt
Example: At 90% threshold with $8,000 debt, liquidation starts when collateral < $8,889
How Risk Escalates: Visual Zone Map
Consider a position with $10,000 initial collateral and $6,000 debt:
POSITION HEALTH VISUALIZATION (for $6,000 debt)
←─────────────────────────────────────────────────────────────→
$10,000 $8,571 $7,500 $6,667 $0
YOU ↓ ↓ ↓
ARE Max LTV Redemption Liquidation
HERE (70%) (80%) (90%)
[════ SAFE ZONE ════][CAUTION][REDEMPTION][LIQUIDATION]
✅ Healthy ⚠️ Warning 🚨 Danger 💀 CriticalZone Breakdown:
🟢 Zone 1: Healthy (Collateral > $8,571)
Below 70% LTV maximum
Can still borrow more
No intervention possible
🟡 Zone 2: Warning (Collateral $8,571 - $7,500)
Exceeded max LTV, cannot borrow
Still safe from redemption
Time to add collateral or repay
🟠 Zone 3: Redemption (Collateral $7,500 - $6,667)
Redemption threshold breached
GREEN holders can redeem your collateral
Acts as automatic deleveraging
🔴 Zone 4: Liquidation (Collateral < $6,667)
Liquidation threshold breached
Multi-phase liquidation activates
Position being actively liquidated
For a detailed explanation of how these thresholds work together, see Understanding Three Thresholds in the borrowing documentation.
The Redemption Buffer
Your First Line of Defense
Before liquidation becomes possible, the redemption mechanism provides a unique protective buffer. When your position enters the redemption zone:
GREEN holders can exchange their tokens for your collateral at exactly $1 value
No discount applied - fair value exchange protects you from penalties
Reduces your debt automatically as collateral is redeemed
May prevent liquidation by improving your position health
This mechanism serves dual purposes: protecting borrowers through gradual deleveraging while helping maintain GREEN's $1 peg during market stress.
The Three-Phase Liquidation Process
When liquidation becomes necessary, Ripe employs a carefully orchestrated three-phase approach designed to minimize impact while ensuring debt repayment.
Phase 1: Using Your Own Assets First
The protocol first looks to your existing positions within Ripe:
Your Stability Pool Deposits
Your own sGREEN deposits in stability pools → burned to reduce debt
Your own GREEN LP deposits in stability pools → sent to Endaoment to reduce debt
Direct debt reduction with no penalties or discounts
These are YOUR deposits being used to pay YOUR debt
Your Stablecoin Collateral
USDC, USDT, and other stablecoins you deposited as collateral
Transferred to Endaoment treasury at 1:1 value
No liquidation discount applied to stablecoins
Immediately reduces your debt dollar-for-dollar
Phase 2: Stability Pool Swaps
Next, the protocol engages stability pools for instant liquidity:
How Pool Swaps Work
Your collateral (ETH, WBTC, etc.) needs liquidation
Stability pools hold GREEN LP tokens and sGREEN
Pool assets swap for your collateral at the liquidation discount
Pool participants get discounted assets, you avoid market dumps
The Win-Win Dynamic
You avoid harsh market conditions and slippage
Pool depositors earn fixed discounts (typically 5-15%)
Protocol maintains orderly liquidations
No dependence on external market depth
Additional Pool Benefits
Depositors earn RIPE rewards from the Stakers allocation
GREEN holders can redeem against pool collateral for peg stability
Flexible withdrawal lets depositors choose which assets to claim
Special Note on Permissioned Assets For regulated assets (tokenized securities, real estate):
Dedicated permissioned pools with whitelisted participants
Same swap mechanics but restricted access
Ensures compliance throughout liquidation process
For deeper understanding of stability pool mechanics, see Stability Pools.
Phase 3: Dutch Auctions
For any remaining collateral after pools are exhausted:
Time-Based Discounts
Auctions start with small discounts (e.g., 2%)
Discounts increase linearly over time (up to 20%)
Anyone with GREEN can buy instantly at current discount
No waiting for auction to "end" - immediate settlement
Auction Mechanics
Initial delay prevents front-running
Buyers can purchase any amount of fungible assets
GREEN payment is burned, reducing your debt
Auction ends when all collateral sold or debt repaid
Any excess collateral value returns to you
Liquidation Economics
Understanding Liquidation Fees
Liquidation fees serve multiple purposes in the ecosystem:
Fee Structure
Base liquidation fee: Typically 5-15% depending on asset risk
Keeper rewards: Small additional fee (0.1-0.5%) for liquidation executors
Total impact: Your cost becomes others' profit opportunity
Where Fees Go
Stability Pool Depositors: Receive discounted collateral as compensation
Keepers: Earn rewards for monitoring and executing liquidations
Auction Buyers: Purchase collateral below market value
Protocol: No direct protocol extraction - all value flows to participants
Partial Liquidation Design
Ripe's system only liquidates enough to restore healthy LTV:
Target Calculation
Determines minimum repayment for safe LTV
Adds small buffer (1-2%) for safety
Preserves maximum collateral possible
Single formula works across all liquidation types
💡 TL;DR: If you're at 80% LTV and need to get back to 50%, we only liquidate exactly what's needed - not your entire position. In the example below, you keep 25% of your collateral instead of losing everything.
Real Example: Partial vs Full Liquidation
Your position hits liquidation threshold:
- Debt: $1,000
- Collateral: $1,250 (too risky!)
- Target: Get back to safe 50% LTV
Other protocols: Take ALL $1,250 → You get $0
Ripe Protocol:
- Takes only $937.50 of collateral
- Pays down debt to $156.25
- You keep $312.50 (25% of original!)
- Position restored to exactly 50% LTV
The 10% liquidation fee ($93.75) goes to stability pool depositors
as their profit for providing instant liquidity.🎯 Key Takeaway: You lost $937.50 but kept $312.50. On other protocols, you'd lose everything. That's a $312.50 difference in your pocket.
The Keeper Network
Your Automated Safety Net
Keepers are the protocol's decentralized guardians — independent operators who monitor positions and execute liquidations when needed. Think of them as automated lifeguards watching over the protocol.
How Keepers Work
Monitor all positions 24/7 for liquidation thresholds
Trigger liquidations the moment positions become unsafe
Earn small rewards (typically 0.1-0.5% of debt) for their service
Compete to execute liquidations quickly and efficiently
Why This Benefits You
Faster Response: Liquidations happen within blocks, not hours
Fair Execution: Open competition prevents insider advantages
Lower Losses: Quick action minimizes how underwater positions get
Always Active: Global network ensures 24/7 coverage
Anyone can be a keeper — no special permissions needed. This open system ensures liquidations happen promptly and fairly, protecting both borrowers and the protocol.
Why Ripe's System is Superior
Quick Comparison
Liquidation Amount
Entire position (100%)
Only what's needed (partial)
Warning System
None
Redemption buffer zone
Liquidation Fee
13-50% penalty
5-15% fixed discount
Who Can Buy
MEV bots only
Anyone (pools + auctions)
Your Assets Used
No
Yes (GREEN/sGREEN first)
Market Impact
Large dumps
Phased, orderly process
Borrower Protection Features
Graduated Intervention: Redemption buffer before liquidation
Partial Liquidations: Only liquidate what's necessary
Internal Recovery First: Use your own assets before external sales
Fixed Discounts: No arbitrary penalties or excessive fees
Multiple Mechanisms: Three phases provide redundancy
System Stability Benefits
Orderly Process: Phased approach prevents cascade failures
Deep Liquidity: Stability pools provide instant buyers
Market Independence: Not reliant on external exchange depth
Rapid Execution: Automated systems respond instantly
Proven Resilience: Designed for extreme market conditions
What If Bad Debt Occurs?
Despite all protective mechanisms, extreme market conditions could potentially create bad debt (where liquidation proceeds don't fully cover the debt). The protocol has a clear resolution mechanism:
Bond Sales for Recovery: The protocol can sell bonds to raise funds that clear bad debt. This process:
Creates RIPE tokens beyond the 1 billion supply cap
Distributes the dilution fairly across all RIPE holders
Ensures bond buyers receive their full allocation
Maintains protocol solvency without penalizing users
For example, if 1M RIPE is needed to cover bad debt, the total supply becomes 1.001 billion. This transparent mechanism ensures GREEN remains fully backed while distributing any dilution proportionally across all RIPE holders.
Liquidations That Don't Ruin Lives
Here's what actually matters:
When others get liquidated: They lose everything. Position gone. Starting over from zero.
When you get liquidated on Ripe: You lose some. Position survives. Still in the game.
That $312.50 difference in our example? That's rent money. That's staying in crypto versus rage quitting. That's the difference between a setback and a catastrophe.
The protocol doesn't do this to be nice. It does it because borrowers who survive keep borrowing, keep paying interest, keep the system running. Your success is the protocol's success.
So go ahead. Take that loan. The safety net has four layers.
For technical implementation details, see the AuctionHouse Technical Documentation.
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