SCCP-260: Update Synthetix Liquidation Parameters

NetworkEthereum & Optimism
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Simple Summary

This SCCP proposes to implement the following:

  • increase the liquidationRatio from 145% to 175%
  • increase the snxLiquidationPenalty from 45% to 75%
  • increase the selfLiquidationPenalty from 40% to 70%


  • liquidationRatio is the ratio below which stakers can be flagged for liquidation, after the liquidationDelay of 8 hours,the flagged staker is liquidated.
  • liquidationPenalty is the penalty paid to other stakers who take on the debt of the liquidated account.
  • selfLiquidationPenalty is the penalty paid to other stakers, when a staker liquidates his debt to the target collateralization ratio.


The motivation for pushing up these parameters are as follows:

  • 1-Year short funding rates on SNX has been been historically around 75%. If a staker who earns liquidation rewards and wants to hedge his escrow, he can't sell it and has to pay an 75% funding rate. So a penalty of 75% would bring the net present value of the debt assumed in line with that of liquidation rewards.
  • Increases the incentive on stakers to repay their debt.
  • Increases the incentive for stakers to bring additional capital into the system to take on the liquidated snx of fallen brothers.

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