Collateralization under stress
Fluid's assessment for RD-F-068 — scored red on the v1.7.0 rubric. The evidence below is the curator's reasoning for this score.
Evidence summary #
Collateralization ratio under stress is an elevated risk for Fluid due to: (1) Smart Vault T2/T3/T4 architecture — DEX impermanent loss on collateral leg can reduce effective collateral value independently of underlying price, creating novel cascade risk; (2) Demonstrated failure: March 2026 wstUSR collateral depeg created >$10M bad debt within one day because hardcoded oracle did not reprice (collateral value stayed at $1.13, actual ~$0.63); (3) Absorbed debt recovery mechanism (positions moved to bookkeeping buckets) assumes future price recovery — sustained depeg produces unrecoverable absorbed debt; (4) Liquidation penalty as low as 0.1% may not attract liquidators for illiquid long-tail collaterals. Red: documented real-dollar collateral cascade event with confirmed bad debt, even if subsequently repaid.
Sources #
- URLCyber.fund Fluid-1 — Liquidation & Smart Collateral ArchitectureCyber.fund — Fluid Part I: Liquidity Layer and Liquidationsretrieved 2026-04-29
- MixBytes — Fluid Vault Technical AnalysisMixBytes blog — Modern DeFi lending protocols: Fluid vaultretrieved 2026-04-29
- Fluid VaultT1 coreModule — liquidate() functionInstadapp/fluid-contracts-public vaultT1/coreModule/main.sol — liquidate() function, liquidation penalty max 10.23%, absorbed debt mechanismretrieved 2026-04-29
Methodology #
Determine whether under curator-defined stress scenario (top-3 collateral assets drop 50%), protocol net collateralization falls below 110%.
See the full factor methodology and distribution across all protocols →