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If the Loan-to-Value ratio reaches 83%, NFT collateral will be set to be liquidated and user will have ~24 hours to either repay back their loan or add more collateral to bring the LTV ratio below 83%.
What happens if the LTV is still above 83% after 24 hours?
User account is liquidated and underwriters effectively become owners of the liquidated NFT collateral.
- 4.Once passed, proposal is manually executed from the DeFragDAO multi-sig.
Gauging floor price and liquidity depth for NFT assets is extremely hard. As our ecosystem continues to develop, the protocol will be able to adjust to a more efficient and automated liquidation process. But because it's still fairly easy to manipulate floor pricing on Trove, especially for low volume collections, manually executing liquidations (in accordance with snapshot vote results) for these nascent liquidations is necessary for now.