Digital Asset Liquidation
For digital assets linked to real assets, automated liquidation procedures are paramount. This is because it should have a legal effect that is forced while maintaining decentralization. The liquidation procedures vary among different asset groups, and in the case of asset bond tokens, the liquidation procedures for assets can be completed while maintaining decentralization:
1) Asset bond token open market registration
If the borrower does not transfer the principal of the loan to Defi Bank by the expiration date recorded on the asset bond token, the asset bond token is automatically listed on the NFT open market.
2) Purchase of asset bond tokens
Bond buyers purchase asset bond tokens listed on the open market. At this time, bond buyers can purchase asset bond tokens at discounted prices based on the pre-contracted content.
3) Transfer of asset bond token disposal amount
When a bond buyer transfers the asset bond token purchase to money pool contract, the loan to DeFi money pool is repaid and the loan to the asset bond token is terminated.
4) Presentation of asset bond tokens
Bond purchases present asset bond tokens purchased from collateral firms. This can occur off-chain, or on-chain.
5) Transfer of loan bonds
Bond purchasing companies can present purchased asset bond tokens to collateral firms and receive actual loan bonds from collateral firms.
6) Notice of transfer of loan bonds
The collateral entity notifies the lender of the transfer of the bond. Since then, bond buyers will cash in the collateral they have transferred through auction.
7) Liquidation participant rewards
In the process of liquidation of spot assets, part of the sale is passed to bond purchasing companies and collateral firms. Various interests exist, and details may vary based on the laws of the region where spot assets are located. Furthermore, the details may vary by contract with the collateral company.
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