Chainflip Docs

Lending FAQ

These questions supplement the core lending documentation and cover additional operational, integration, and risk-model topics.

Account & Market Structure

Are loan positions isolated?

No. Loan positions are not isolated. All collateral and all debt inside a borrower’s State Chain account contribute to a single combined LTV. If that LTV breaches a liquidation threshold, the entire account is liquidated, not individual loans. Per-loan liquidations are not supported in this version.

Are lending markets isolated per asset?

Yes. Each asset has its own supply pool, utilisation curve, and reserves. Risk does not spill over between assets.

Can I deposit and withdraw freely?

Yes. Deposits and withdrawals are permissionless. They may be temporarily paused only if:

oracle prices become stale
extreme volatility triggers a safety check
vault or network health triggers a protective pause

Pauses lift automatically when conditions normalise.

Yes. The Chainflip State Chain account can hold balances, collateral, debt, and free funds. Loan positions are isolated; the account itself is unified.

Event Streams, Bots & Integrations

How are liquidations announced through RPC/API?

Liquidation swaps appear in the same event stream as regular scheduled swaps.

There is no special metadata that distinguishes liquidation swaps from ordinary swaps. They are processed exactly the same way, and LPs are expected to price all swaps competitively,there is no need for them to know which swaps are liquidations.

Large liquidations simply appear as multiple DCA-style tranches.

Are liquidation orders flagged separately?

No, they are not flagged.

Can integrators surface liquidation data in their own UIs?

Yes. All liquidation activity is exposed through standard RPC events.

Backstops, Insurance & Stability

Is there an insurance fund or stability pool?

Not at launch. If collateral is insufficient during liquidation, losses are socialised to lenders of that asset only. Future backstops (insurance funds, reserve buffers, stability pools) may be added via governance.

Could a Liquity-style Stability Pool be added later?

Technically yes, but with trade-offs:

lower capital efficiency
reduced market isolation
governance complexity
opportunity costs for suppliers

Requires separate evaluation.

Will there be an official or treasury-run liquidator?

No. All liquidations are permissionless. Introducing an official liquidator would be a governance decision.

Capital Efficiency & Scaling

How can Chainflip scale lending without deep on-DEX liquidity?

Scaling comes from:

utilisation curves and rate adjustments
supply-side growth (stablecoin lenders, integrators, aggregators)
diversified collateral support

Chainflip does not need deep liquidity in each asset because liquidations use oracle-indexed DCA tranches, not large all-in-one sales.

How will stablecoin supply be bootstrapped?

At launch:

incentive programs
wallet/exchange/integrator flows
aggregator routing (LI.FI, Squid, Rango, etc.)

No wrapped or synthetic stablecoin is required.

Can external protocols supply liquidity via proxy contracts?

Yes. Protocols can integrate via an EVM proxy that deposits into Chainflip pools. Risk boundaries remain isolated at the loan-position level.

Governance & Parameter Changes

Who controls lending parameters like LTV, caps, and fees?

Protocol governance. Changes follow the same upgrade path as other Chainflip modules (runtime upgrade + validator consensus).

Who defines new modules such as insurance funds or backstops?

Governance: responsible for design, capitalisation, safety constraints, and fee routing.

Can governance pause lending during an emergency?

Yes. Via Safe Mode, governance can temporarily pause:

new loan creation
liquidations
vault egresses

Repayments or top-ups may remain enabled depending on Safe Mode level.

Liquidity & Execution Behaviour

Are liquidations prioritised over normal swaps?

Not artificially.

All swaps, liquidation or regular, are bundled together before execution. LPs do not target individual swaps, instead they place limit orders at specific blocks, and the protocol consumes those orders as long as price limits (LPP) are respected.

However, liquidation swaps may have a higher chance of being executed because:

they always use LPP-based pricing
they follow market price even if it drops significantly
unlike regular swaps, they do not have an absolute minimum price that could cause a refund

Do liquidations affect normal user swaps?

No. The JIT AMM ensures:

stable quoting
consistent spreads
normal refund behaviour
non-blocking execution

Can liquidation events cause swap failures or delays?

Not under normal conditions. Liquidation and non-liquidation flow coexist without queueing or blocking.

Collateral & Position Management

Does collateral automatically earn yield?

No. Collateral is not supplied to pools in this version. Borrowers pay interest; suppliers earn interest.

Does auto-top-up guarantee no liquidation?

It prevents liquidation as long as the account has enough free balance. If free balance is insufficient, liquidation proceeds normally.

Can I borrow against multiple collateral assets?

Yes. LTV is calculated per-account using the aggregated oracle value of all collateral assets.

Partial Repayments, Partial Liquidations & Edge Cases

Can I repay partially?

Yes. Partial repayments reduce outstanding debt and improve LTV.

Are liquidations partial?

Yes. Liquidations occur in tranches, not a single large sale. This reduces slippage and borrower loss.

What happens if liquidation recovers more than the debt?

Excess collateral is returned to the borrower automatically.

What happens if collateral is insufficient?

The shortfall is socialised to lenders of that asset only.