Cascade — the molten chain reaction
When a position drifts below its collateral line — the edge — a keeper reclaims its collateral at a penalty to keep the protocol whole. It pours over the edge and does not stop at one.
The edge
Every borrowed position carries a health factor — the distance between what it holds and what it owes. As long as collateral sits above the required line, the position is safe and untouched. The line is the edge: cross below it and the position is no longer solvent enough to stand on its own. Markets move; the edge does not. When the two meet, the Cascade is permitted.
- ▸
health factor > 1— sealed, above the line, no one may touch it - ▸
health factor = 1— at the edge, one tick from ruin - ▸
health factor < 1— over the edge, the Cascade opens
What a keeper reclaims
A keeper — human or machine, the protocol does not care which — calls the liquidation. It repays part of the position's debt and seizes collateral of equal value plus a penalty, the spread that pays for the act. This drags the position back above the edge and keeps the reservoir solvent for every other borrower. The keeper takes the penalty; the lenders keep their principal whole. No mercy, no committee — the math answers to no one.
- ▸Keeper repays debt, seizes collateral + penalty
- ▸Penalty is the keeper's reward for keeping the system whole
- ▸Lenders are made whole before any loss reaches them
Why it doesn't stop at one
A large Cascade dumps seized collateral into the market, and the price drops. That drop pushes the next thinly-collateralized position below its own edge — and the next keeper moves. This is the chain reaction the name carries: one liquidation feeds the conditions for the following one. Health buffers and partial liquidations are the dampers that slow the pour before it becomes a flood.
- ▸Seized collateral sold → price moves down
- ▸Lower price → the next position crosses its edge
- ▸Partial liquidations and buffers slow the chain
Where it lives, and how to stay above
The Cascade is not a feature you open — it is the consequence that watches every Magma and Lava position you hold. Your defense is margin: keep the health factor well above the line, watch it on the position panel, and add collateral or repay before the market does it for you. Open any borrow in Magma (cross-margin) or Lava (isolated) and the health bar is shown plainly. Stay above the edge, and the fire stays sealed in glass.
- ▸Watch the health bar on every borrowed position
- ▸Add collateral or repay to climb back from the edge
- ▸Isolated Lava markets wall a Cascade off to one pair