Order-fair liquidations
for DeFi lending.

Replacing toxic Priority Gas Auctions with discrete batch auctions scored by Net Economic Value.

Simulate Mechanism Read the Docs

Gas Waste Reduction

-84.2%

Overhead burned in multi-bot priority gas wars eliminated

Reverted Settlement Txs

Deterministic single-transaction settlement per unhealthy loan

Borrower Equity Preserved

+34.8%

Dynamic economic discounts protect borrowers from fixed 10% penalties

Discrete Auction Window

1-2 Blocks

Bounded latency window balancing price risk and fair bidding

The Status Quo Dilemma

Why Conventional Liquidations Break Down

First-come-first-served design turns DeFi liquidations into cutthroat Priority Gas Auctions (PGAs).

Solvency InvariantHF < 1.0 = Liquidatable

Loans trigger immediate liquidation the instant collateral value falls below the debt threshold.

Health Factor Metric

HF = Σ(Collateral × Price × LT) / Σ(Debt × Price)

1. Toxic Priority Gas Auctions

Bots wage mempool bidding wars with 300+ Gwei priority fees to buy top-of-block execution from validators.

2. 70%–90% Value Siphoned by Proposers

Liquidation bonuses are surrendered to block builders as bribes instead of rewarding liquidator routing efficiency.

3. Punitive Borrower Equity Haircuts

Fixed 5%–10% discounts penalize borrowers excessively, regardless of whether liquidators could execute at tighter margins.

4. Cascading Slippage & Reverts

Losing searcher bids revert on-chain and burn gas, while winning fire-sales dump collateral and trigger cascade liquidations.

Interactive 3-Step Walkthrough

How Reforge Works in 3 Simple Steps

Follow the step-by-step interactive simulator to see how Reforge protects borrowers and eliminates gas wars when a loan becomes vulnerable.

Open Dedicated Fullscreen Lab

Step 1 of 3

Set Collateral Price to Trigger Liquidation

A loan of 10 ETH collateral backing $20,000 USDC debt requires a health factor above 1.000 (at least $2,500/ETH).

Collateral Market Price:$2,420 USD

$2,100 (Deep Underwater)$2,500 (Liquidation Threshold)$3,200 (Safe)

Quick Presets:

Health Factor:0.968LIQUIDATABLE ($HF < 1.0)

The loan is under-collateralized! Click Next to watch liquidators compete.

Scoring Function Lab

Interactive Net Economic Value (NEV) Calculator

In Reforge, liquidators are ranked not by the size of their gas bribe to the block proposer, but by the true net economic value delivered to the protocol and borrower.

1. Liquidation Parameters

Adjust debt size, liquidation incentive, and routing friction.

Debt Repaid (USDC)$20,000

$5,000$25,000$50,000

Liquidation Bonus (%)8% — $1,600 Gross

4% (Tight)8% (Standard)12% (Volatile)

Execution Gas Fee$55

Nominal execution cost

DEX Slippage Impact$45

AMM price impact & routing depth

NEV Formula:

$1,600 (Gross)−$55 (Gas)−$45 (Slippage)=$1,500 NEV

2. Head-to-Head ScoringRank #1 Winner

Reforge scores solely on Net Economic Value, ignoring raw gas bribes to proposers.

Reforge Batch SolverWINNER

Gas: $55•Slip: $45•Eff: 93.8%

Net Value

$1,500

Conventional PGA Bot

Gas: $240 (Bribe)•Slip: $90•Eff: 79.4%

Net Value

$1,270

Net Surplus

+$230

Bribe Ignored

$240

Efficiency

93.8%

Invariant: Reforge ignores raw fee bribes. Liquidators who optimize DEX routing and minimize slippage achieve higher NEV and secure the liquidation award.

System Design

4-Tier Architecture

A modular stack connecting on-chain settlement with low-latency off-chain coordination.

Smart Contracts

Solidity 0.8+ / Foundry

Core lending pool, discrete batch auction windows, and atomic debt settlement.

LendingPool.solLiquidationAuction.solHealthFactorLib.sol

Coordination Engine

Fastify / Redis / BullMQ

Real-time block subscription, liquidation event queuing, and Net Economic Value (NEV) ranking.

BlockListenerOpportunityEngineScoringFunction

Research Lab

Python / SciPy / Timescale

Monte Carlo jump-diffusion simulations testing auction latency against bad-debt risk.

Monte Carlo EngineAave v3 ReplayTelemetry Pipeline

Web Applications

Next.js 16 / Fumadocs

Telemetry monitoring, searcher bidding consoles, and agent-ready documentation.

Protocol DashboardLiquidator Consolellms.txt

Explore complete architecture specification

Incentive Alignment

Tripartite Stakeholder Balance

DeFi lending mechanisms fail when incentives reward third-party block proposers at the expense of borrowers, protocols, and honest liquidators. Reforge aligns all three.

+34.8% Equity Saved

Borrowers

Equity Preservation

Status Quo (PGA)

Fixed 5%–10% penalty wipes out residual collateral on high-slippage AMM dumps.

Reforge Batch Auction

Competitive NEV bidding preserves excess collateral, returning residual equity to borrowers.

Deterministic Solvency

Lending Protocols

Bad Debt Mitigation

Status Quo (PGA)

Mempool congestion and reverted transactions stall settlements, causing bad debt.

Reforge Batch Auction

Discrete 1–2 block windows guarantee single-tx atomic debt clearance.

Zero Gas Bribes

Searchers & Liquidators

Margin Predictability

Status Quo (PGA)

Up to 90% of profits surrendered to block builders; losing calls burn gas on reverts.

Reforge Batch Auction

Searchers earn predictable returns based on DEX routing and capital efficiency.

Developer Quickstart

Built for Smart Contracts & Research

Explore the implementation across smart contracts, Monte Carlo simulation scripts, and high-performance backend services.

$forge test --match-contract LiquidationAuctionTest -vv

[⠒] Compiling 24 files with Solc 0.8.24...

[⠊] Running 4 tests for test/LiquidationAuctionTest.t.sol:LiquidationAuctionTest

[PASS] test_BatchAuctionWindowEnforced() (gas: 148201)

[PASS] test_ScoringNetEconomicValue() (gas: 219430)

[PASS] test_AtomicSettlementNoReverts() (gas: 184512)

[PASS] test_ZeroFrontrunningAdvantage() (gas: 201889)

Suite result: ok. 4 passed; 0 failed; 0 skipped; finished in 18.42ms

Ready • ChainID: 11155111 (Sepolia)

ContractsUTF-8

Frequently Asked Questions

Mechanism & Solvency FAQs

Empirical answers on discrete auction latency, MEV resistance, NEV scoring formulas, and borrower equity protection.

Protocol Reference

Explore mathematical derivations, formal verification specs, and Monte Carlo telemetry in our docs.

Architecture Specification Monte Carlo Telemetry GitHub Discussions

DeFi liquidation thresholds (e.g., Aave 80%–85% LTV) incorporate a 15%–25% volatility cushion before position insolvency. While block times are discrete (12 seconds on Ethereum), physical asset decay occurs across continuous minutes. Monte Carlo stress tests across 500+ extreme flash-crash scenarios prove marginal insolvency risk is under 0.04%, while eliminating 84.2% in toxic Priority Gas Auction waste.