Liquidation & Default

While an issuance is Active a Keeper Bot monitors the oracle price of the collateral. If the collateral ratio drops below the safety threshold the bot triggers a grace timer recorded on chain. The issuer may restore coverage by adding collateral or repaying part of the balance. If the timer expires while coverage is still low the program marks the contract Liquidated. Investors burn their LTT to claim a proportional share of the collateral from the vault or its on-chain sale proceeds. The issuer forfeits the pledged assets and the issuance ends.

If the Active state reaches its maturity timestamp and the Funding Vault does not contain full repayment the Keeper Bot sends a default instruction. The program marks the contract Defaulted. Collateral exits the vault to investors under the same burn-and-claim process used in a liquidation. Both failure paths close the contract permanently and ensure investors recover value directly from collateral when the issuer cannot meet the terms.