Liquidation Partner Program (LPP)

Kuma's liquidation partner program (LPP) enables the insurance fund to hand off acquired positions to trusted trading partners.

Kuma's liquidation design calls for the insurance fund (IF) to immediately close any acquired positions against liquidity on the order books. While simple to implement and reason about, this approach negatively impacts liquidity and may be susceptible to manipulation. Rather than implement more sophisticated trading schemes internally, the LPP allows the IF to hand off acquired positions to trusted trading partners for later closure.

Liquidated positions should be transferred automatically to the LPP partner's trading wallet with minimal interaction on their part. In order to meet Kuma's contract security model, the Liquidation Partner (LP) must place large standing buy and sell orders on all markets against which IF closure orders may be executed without interacting with the order book. These side channel orders ensure that terms are signed by both the LP and IF, thus meeting contract validation requirements, but eliminate the need for the LP to take action on each liquidation event. They also allow the LP to adjust order parameters to meet their risk management requirements over time. In the LPP model, liquidation service (LS) attempts to hand off any positions acquired by the IF at predetermined pricing terms to the LP as a first resort. If LP side channel orders are insufficient or unavailable, the LS proceeds with closing acquired positions against liquidity on the order books.

Please contact @AlexWearn on Telegram if you are interested in participating in the LPP on Kuma.