III. Risk Management and Liquidation Mechanisms

1. Dynamic Collateralization and Liquidation:

   • Collateral Monitoring: Real-time tracking of collateral value; liquidation is triggered if it falls below 150%.

   • Liquidation Process:

     1. Liquidators call liquidate(), pay debt, and receive collateral discounts (e.g., 5% reward).

     2. Collateral is auctioned via decentralized protocols (e.g., B.Protocol).

   • Code Snippet:

     contract LiquidationEngine {
         struct Position {
             address owner;
             uint256 collateral;
             uint256 debt;
         }
     
         // Liquidation function
         function liquidate(uint256 positionId) external {
             Position storage pos = positions[positionId];
             uint256 collateralValue = oracle.getPrice(pos.collateralToken) * pos.collateral;
             uint256 minRequired = pos.debt * MIN_COLLATERAL_RATIO / 100;
     
             if (collateralValue < minRequired) {
                 uint256 discount = pos.debt * 5 / 100; // 5% liquidation reward
                 pos.collateralToken.safeTransfer(msg.sender, discount);
                 _auctionCollateral(pos.collateral - discount);
             }
         }
     }

2. Oracle Security Design:

   • Multi-Source Aggregation: Uses Chainlink’s DECO protocol to aggregate ≥3 independent data sources.

   • Anomaly Detection: Functions are paused if price deviations exceed 5%, triggering governance alerts.