Liquidatable

The liquidatable layer of the EMP is what keeps every synthetic fully backed without the protocol stepping in. It lets anyone remove a position that has fallen below its minimum collateralisation ratio.

Liquidation

A liquidator submits a liquidation against a sponsor position and posts a bond. If the liquidation is correct and undisputed through its liveness window, the liquidator takes a reward out of the position's collateral. This gives keepers a standing incentive to watch open positions, the dashboard lists other users' positions for exactly this reason.

Dispute

A sponsor who thinks a liquidation is wrong, or any third party, can dispute it by posting a matching bond. The dispute goes to the optimistic oracle for a reference value:

• if the position was in fact healthy, the disputer wins the liquidator's bond and the position is restored;
• if the position was under-collateralised, the liquidation stands and the disputer loses their bond to the liquidator.

Both sides have capital at risk, so neither a frivolous liquidation nor a frivolous dispute is cheap.