BREAKING DOWN CURVE’S LLAMMA INNOVATION

Summary from the TLDR Crypto newsletter

Curve has introduced a novel lending-liquidating algorithm, LLAMMA, that aims to improve the process of liquidation in DeFi lending. Rather than using "hard liquidations", which are common in overcollateralized lending, LLAMMA uses a "soft liquidation" process which gradually liquidates collateral across a price range, potentially mitigating loss for borrowers. How it works is that borrowers deposit collateral into LLAMMA, receive debt in Curve's stablecoin crvUSD, and have collateral spread across bands to create a liquidation range. The protocol relies on oracle prices and arbitrage opportunities to maintain solvency and operate the soft liquidation process.