Curve Finance Introduces Soft Liquidation Model for Borrowers

Curve Finance has implemented a soft liquidation model to help borrowers in DeFi avoid sudden and severe losses. The Lending-Liquidating AMM Algorithm, or LLAMMA, was launched in 2023 as part of Curve's crvUSD stablecoin system.

Under this new model, when a borrower's collateral falls below a set level, the system splits it across multiple price bands and gradually converts it into crvUSD. This approach is designed to treat liquidation less like a cliff and more like a gentle slope.

In simulations, typical losses during soft liquidation run under 0.1% per day, which is significantly lower than traditional hard liquidation systems on platforms like Aave or Compound.