Liquidation Services
Evolve runs Liquidation Services to make eUSD safely usable across DeFi markets—especially for lending and borrowing use cases. When yield-bearing tokens like eUSD are accepted as collateral on protocols such as Takara Lend (fork of Compound V2), Yei, Morpho, and similar markets, the health of the lending market depends on one thing:
positions at risk must be liquidated quickly and reliably.
Relying solely on secondary DEX liquidity for eUSD can be inefficient. Deep pools often require continuous, expensive liquidity incentives and can still fail under stress—exactly when liquidations matter most.
Why Evolve provides liquidation execution
Evolve’s approach is to provide specialized liquidation execution as an alternative (or complement) to subsidized DEX depth.
Liquidation bots monitor supported lending markets for accounts approaching liquidation thresholds. When a position becomes liquidatable, the liquidation service:
Purchases the collateral (eUSD) and repays the borrower’s debt
Restores solvency in the lending market by closing risky positions
Redeems acquired eUSD via native redemption rails, converting it back into the designated redeem asset (per eUSD redemption rules)
This makes liquidation more predictable because it ties liquidity to eUSD redeemability and operational SLAs, rather than relying on volatile DEX pool depth.
How the liquidation loop stays capital-efficient
Liquidation capacity is actively managed and continuously recycled.
Example (illustrative):
The liquidation bot executes a $1M liquidation on a Morpho market
It acquires $1M of eUSD collateral
It promptly redeems eUSD via the primary redemption path
Proceeds are recycled to replenish liquidation capital, ensuring the next liquidation can be executed on time
This loop reduces dependence on mercenary liquidity mining and helps keep lending markets healthy.
Liquidation SLAs and capacity targets
Liquidation services target SLAs designed to support liquidating up to ~10% of an eUSD vault’s TVL at any time, subject to:
lending venue constraints (market parameters, liquidation incentives, caps)
eUSD redemption constraints (queue behavior, windows, liquidity policy)
operational risk controls (limits, exposure, counterparties)
Capacity is monitored and rebalanced continuously.
Why this matters
By making liquidations reliable, Evolve enables eUSD to function as a robust collateral primitive across SEI DeFi:
healthier lending markets
more predictable risk management under stress
reduced need for expensive, continuous DEX liquidity incentives
tighter coupling between collateral liquidity and the underlying bankruptcy-remote segregated vault structure via native redemption rails
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