Buyouts & Liquidation

ENNI uses two mechanisms to keep the system healthy: buyouts and liquidation. Buyouts are voluntary and compensate the borrower. Liquidation is the last resort.

Buyout System

Anyone can buy out a portion of another user’s CDP at any LTV below 88%. The buyer pays the debt plus a premium in stablecoins and receives the equivalent WETH collateral at oracle price. The borrower’s debt is reduced and they earn the premium as claimable credit.

Example at 70% LTV:

Position: 10 ETH collateral, 17,500 enUSD debt (ETH at $2,500)
Buyer repays 5,000 enUSD

Premium at 70% LTV: 6%
Premium: 5,000 × 6% = 300 enUSD
Buyer pays: 5,300 enUSD total
Buyer receives: 5,000 / 2,500 = 2 ETH

After:
  Position: 8 ETH, 12,500 enUSD debt
  Borrower earned: 300 enUSD premium credit

Premium Rates

Riskier positions have lower premiums to encourage clearing them first.

Why Buyouts Matter

Buyouts are the primary peg recovery mechanism. When a stablecoin trades below peg, arbitrageurs buy it cheap on a DEX and use it to buy out collateral at oracle price. Even after the premium, the discount makes it profitable. This creates sustained buy pressure until the peg recovers.

For borrowers, getting bought out is not a punishment. Your debt goes down, your LTV stays roughly the same, and you earn premium credit that you can claim anytime.

Rules

• Remaining debt after a partial buyout must be at least 400 units or zero
• Buyer cannot repay more than the total debt
• Premium credit is claimable anytime through the app or via claimPremium() on the contract

Liquidation

When a position reaches 88% LTV or above, it becomes liquidatable. Anyone can liquidate it by repaying some or all of the debt in stablecoins and receiving a proportional share of the collateral.

Example:

Position: 5 ETH collateral, 10,000 enUSD debt
ETH drops to $2,250 → LTV ≈ 88.9% (liquidatable)

Liquidator repays 5,000 enUSD (half the debt)
Collateral seized: 5 × (5,000 / 10,000) = 2.5 ETH
Donation: 2.5 × 3% = 0.075 ETH → Rewards Vault
Liquidator receives: 2.425 ETH (~$5,456 value)
Liquidator profit: ~$256

The collateral seized is always proportional: collateral × (repayAmount / totalDebt). The liquidator’s profit comes from receiving collateral worth more than the debt they repaid.

The 3% Donation

3% of all seized collateral goes to the Rewards Vault as WETH. This benefits ENNI stakers and applies to liquidations across all markets. If the donation fails for any reason, the liquidator receives the full amount instead.

Avoiding Liquidation

Keep your LTV well below 88%. You can:

• Add collateral to lower your LTV
• Repay debt partially or fully
• Let buyouts happen naturally at lower LTVs, which reduces your position size and earns you premium

The app shows your current LTV, liquidation price, and simulates changes before you confirm any action.

Buyout vs Liquidation