Risk Notes

OpenLend uses external lending layers such as Aave v3 and Morpho on Arbitrum. Collateral is supplied to the selected underlying market and debt is borrowed from it, while OpenLend adds a tick-band controller around the position.

This means the underlying lender remains the hard-liquidation layer. OpenLend's soft-liquidation mechanism is designed to act before that point, gradually adjusting the position as price moves through the selected band.

OpenLend markets use internal LTV caps below the underlying lender's liquidation threshold. The goal is to leave room between the OpenLend soft-liquidation range and hard liquidation.

That extra room helps the protocol tolerate price movement, execution latency, and temporary market conditions without relying on perfect timing.

Soft liquidation does not happen automatically at the exact moment a price enters the band. It is executed by external solvers that call the pool when the on-chain conditions are valid.

If gas is high, the network is busy, or a fill is temporarily uneconomic, execution can happen with a delay. Positions are therefore opened with buffers and range checks rather than assuming instant execution.

Solving is permissionless. A solver does not need to be a trusted OpenLend operator; any participant can call the fill or de-fill path when the trade is valid.

This makes execution a market function. Solvers compete to perform profitable adjustments and can route the resulting exposure through DEXs or other liquidity venues.

During soft liquidation, solvers receive a discount that can make it profitable to buy collateral from the position and hedge or arbitrage it externally.

During de-liquidation, the incentive works in the opposite direction through a premium. These incentives compensate solvers for gas, inventory risk, price movement, and execution complexity.

Losses associated with soft liquidations and de-liquidations are reflected as a debt-side adjustment, together with borrow interest, instead of simply reducing the displayed collateral balance.

This is useful because the position can keep its collateral exposure. The cost of execution is visible in debt, while the collateral side can still recover exposure when price moves back through the band.

For a basic position, the main numbers to watch are LTV, the current price relative to the soft-liquidation band, realized soft-liq loss, and the distance to the underlying liquidation threshold.

These signals are context rather than automatic emergency labels. They help explain how the position is being managed over time.