Curve Finance adopts soft liquidation model

Collateral posted for loans on DeFi protocol Curve Finance (CRV) is not always sold off immediately in full when it enters the liquidation zone, CoinDesk reported. According to the outlet, there were 704 such cases. The median time a loan position remained in the liquidation zone was 14.5 days, while 25% stayed there for more than 38.9 days. Some lasted for months. Curve handles such cases through what it calls a 'soft liquidation' mechanism. As collateral prices fall, the collateral is gradually converted into the borrowed asset, and if prices later recover, some or all of the converted collateral can be shifted back into the original collateral asset. In other words, entering the liquidation zone does not automatically mean a loan will be fully liquidated right away. Losses can still occur through fees, interest and asset conversions, and if prices keep falling, the position can still end in full liquidation.