Vault Protocol

Fluid’s Vault Protocol is a CDP-based borrowing system (similar to Maker DAO) that enables up to 95% LTV and supports single collateral-single debt positions.

Liquidations on Fluid

Vaults on Fluid operate differently than in traditional protocols, where collateral is composed of two interchangeable assets (e.g., WBTC and cbBTC) and can be pooled together to earn trading fees. Works also for dual asset debt (e.g. USDC and USDT).

• Smart Collateral/Normal Debt: WBTC - cbBTC / USDC or weETH - ETH / wstETH

• Normal Collateral/Smart Debt: ETH / USDC - USDT or wstETH / USDC - USDT

• Smart Collateral/Smart Debt: WBTC - cbBTC / WBTC - cbBTC or wstETH - ETH / wstETH - ETH

Fluid employs a slot-based liquidation system, where when a user opens a Vault, their LTV is assigned to a specific slot. Positions within the same LTV are grouped into slots, which allows simultaneous liquidations, making the process faster and more gas-efficient.

After a liquidation event, the remaining positions are moved to the next slot based on the new market price.

The protocol only liquidates a portion of the position necessary to bring the position back to a healthy ratio, which reduces market impact and potential cascading liquidations.

Liquidation penalty in Fluid can be as low as 0.1% (up to 3%), while on other protocols it generally ranges from 5-10%.

Trader-as-Liquidator (by integrating with the DEX aggregators) allows any trader to participate in the liquidation process, ensuring liquidity and enhancing efficiency.

• When a liquidation occurs, the liquidatable collateral is available for traders (that execute regular swaps through DEX aggregators) to swap for a discounted value while indirectly liquidating high LTV positions.