Summary

After an initial measure to block borrowing (RIP36), this proposal aims to immediately increase the liquidation bonus from 10% to 30% to strengthen incentives for liquidation. To limit the risk of bad debt, this bonus will be manually adjusted by RealT according to the following thresholds:

• 30% by default (applied upon approval).
• Reduced to 20% if the lowest Health Factor (HF) falls below 0.92.
• Return to 10% if the lowest HF falls below 0.85 or lowest HF>0,99.

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Motivation

Recent Data:

• Liquidatable unpaid loans (HF < 1) represent a debt of $2,358,051 (as of Sunday, February 15, 2026, at 10:50 PM), steadily increasing.
• Daily liquidations are negligible: $114/day on average over the last 7 days, and only $2/day over the last 3 days.
• The current 10% bonus is insufficient to motivate liquidators.

Why Act Now?

• Low liquidation activity increases the medium-term risk of bad debts.
• A 30% bonus will incentivize liquidators to act faster, reducing the risk of uncovered debts.

Why Adjust the Rate Based on the Lowest Health Factor?

• HF = Health Factor
• LT = Liquidation Threshold
• LB = Liquidation Bonus

During liquidation, the liquidator repays part of the debt in USDC or WXDAI and receives collateral from the borrower in return:

• Liquidator Reward = Repaid Value × (1 + LB)

The protocol must ensure that the liquidator always receives the expected reward. If there is not enough collateral to reward the liquidator, it results in bad debt. We must delay this scenario as much as possible, which is why the 30% liquidation bonus cannot be maintained indefinitely.

The Health Factor can be used to determine the threshold below which there is insufficient collateral to reward the liquidator:

• Reminder: HF = Collateral × LT / Debt
• The minimum HF to ensure balance is HFmin = LT × (1 + LB).

For:

• LB = 30%, HFmin = 0.70 × 1.3 = 0.91. As long as HF > 0.91, the liquidator can be rewarded as expected. We have set 0.92 as the threshold to reduce the LB from 30% to 20%, to allow some margin (and time for RealT to adjust the LB).
• LB = 20%, HFmin = 0.70 × 1.2 = 0.84. As long as HF > 0.84, the liquidator can be rewarded as expected. We have set 0.85 as the threshold to reduce the LB from 20% to 10%, to allow some margin (and time for RealT to adjust the LB).
• LB = 10%, HFmin = 0.70 × 1.1 = 0.77. As long as HF > 0.77, the liquidator can be rewarded as expected.

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Context

• The RMM no longer has liquidity (the $14.75M deposited is fully borrowed), blocking depositors (who can no longer withdraw their deposits) and pushing rates to the maximum (31.65% for borrowers).
• The first measure was to block borrowing, so that incoming liquidity (deposits, repayments, and liquidations) could be used by depositors rather than new borrowers.
• Incoming liquidity is low and immediately withdrawn by depositors, leaving liquidity at zero, rates at maximum, and without further action, this situation could persist for a long time (daily flows are visible on this site).
• Many wallets are liquidatable (Health Factor < 1), but liquidations are not being executed because the RealTokens obtained in return for repayment during liquidation are received with a bonus that is too low (10%) compared to market value. Over $1.3M in debt is thus blocked.

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Implementation Steps

• Step 1 – Discussion & Poll (Forum) A discussion phase was organized on the Forum starting January 19 to determine which parameter to modify (LTV, Liquidation Threshold, or Liquidation Bonus) and its value. Poll Result: The majority voted for a one-time adjustment of the Liquidation Bonus to 30% (23 votes in favor, 8 against).
• Step 2 – Governance Vote (Tally) A single vote will be submitted on Tally with the following resolution: "Should the liquidation bonus be adjusted to strengthen incentives for liquidations?"
  • If approved, RealT will apply the new Liquidation Bonus value.
  • If rejected, the Liquidation Bonus will remain unchanged.

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Team

Implementation will be handled by RealT under the DAO’s mandate. No additional contributors are required.

Budget

No treasury expenses are required. This proposal only modifies an existing protocol parameter.

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Roadmap

• Preliminary discussions on the Forum: Suggestion Phase, then Proposal Construction Phase (January 19 to February 19: 1 month).
• Proposal published on Tally: February 20.
• Vote on Tally: February 21 to February 28 (7 days).
• Execution deadline: 3 days.
• Implementation by RealT: March 3.
• Monitoring of utilization rate and liquidations.
• The Liquidation Bonus will be adjusted based on the evolution of the position with the lowest HF or through a new DAO vote.

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Objectives

Short-term:

• Attempt to bring in new liquidity.
• Reduce the risk of bad debt by incentivizing liquidators to act faster.
• Improve liquidation efficiency with an increased bonus.

Long-term:

• Establish a simple and transparent method for adjusting bonuses based on market conditions.
• Preserve the sustainability of the protocol.

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Key Terms

• Liquidation Bonus: Discount granted to liquidators when purchasing collateral from at-risk positions.
• Borrowing Block: Temporary suspension of new borrowings (initiated as an emergency measure, then voted via RIP 36).
• Bad Debt: Debt that cannot be covered by liquidating collateral.
• YAM: Secondary market where RealT tokens are currently traded at a discount.
• Utilization Rate: Percentage of deposited liquidity currently borrowed.

https://forum.realtoken.community/d/98