Forum Link: https://forum.inverse.finance/t/proposal-to-launch-liquidator-grant-program/465

Problem Summary

FiRM offers exotic collateral types such as illiquid tokens, niche DeFi derivatives, and real-world assets (RWAs) that may not be monitored by traditional liquidators. These assets pose risks of delayed liquidation due to their illiquidity or lack of clear liquidation routes.

Objective

The Liquidator Grant Program aims to:

• Attract liquidators to monitor and liquidate exotic collateral markets.
• Establish direct communication with liquidators for ongoing engagement and updates.

Strategic Benefits

Feedback Loop for Market Health
By engaging liquidators, we can gather feedback on asset volatility, liquidity issues, and suggest improvements to the liquidation process. Liquidators will help us adjust collateral parameters and optimize liquidation strategies.

Strengthening Liquidator Commitment
Building a liquidator network promotes long-term engagement and efficiency, ensuring the health of exotic collateral markets.

Mitigating Risk in Illiquid Markets
Exotic collaterals are riskier. Incentivizing liquidators to monitor them closely reduces the chance of liquidity crises or sudden price drops.

Program Rollout

Manual Liquidation Proof Submission
Liquidators submit proof of successful liquidations via our website, including transaction details.
The team will verify liquidations, ensuring they meet program criteria, and rewards will be distributed to liquidators’ wallets on-chain.

Direct Communication with Liquidators
We will establish channels (e.g., Telegram/Discord) for liquidators to ask questions, give feedback, and stay updated on new collateral types and liquidation processes.

Incentive Structure

Reward Program
Liquidators will receive DBR tokens for their first unique liquidation in an eligible market, up to $250. Exotic or harder-to-monitor collaterals will offer higher rewards (up to $500), encouraging liquidators to prioritize these assets. The RWG will maintain an open dashboard of eligible markets and the first 3 liquidators of a market will be rewarded. The RWG also reserves the right to veto suspicious submissions.

KPIs and Objectives

The program aims to onboard 20 new liquidators, increasing unique liquidator participation by ~50%.

On-Chain Actions

Grant the RWG Multisig an allowance of 120,000 DBR (equivalent to ~$5000 at Sep 23rd, 2024 prices) to fund the Liquidator Grant Program.