Liquidations are the enforcement mechanism for the 10% collateral requirement in Bandits.Fun. Every holder must maintain USDT collateral equal to at least 10% of the USD value of their $GOLD, calculated using a 15-minute TWAP oracle price. If a holder’s collateral balance falls below this threshold, the protocol triggers an immediate full liquidation of the position. In liquidation, both the holder’s USDT and $GOLD are seized in entirety. Seized assets are routed according to protocol parameters. All liquidations are processed on-chain, with liquidated addresses recorded publicly for transparency.

Liquidations: Step-by-Step Process

1. Collateral Check

1. The protocol continuously tracks the USD value of every holder’s $GOLD using a 15-minute TWAP oracle.
2. Each bandit must keep 10% of their $GOLD’s USD value staked in USDT collateral. This collateral represents the cut allocated to their own henchmen to guard the stash.
3. If a holder’s collateral ever drops below 10%, they are immediately flagged for liquidation.

2. Liquidation Trigger

1. Once flagged, the protocol performs a full liquidation of the position.
2. Both the bandit’s staked USDT and their entire $GOLD balance are seized at once.
3. Liquidation applies to all wallets equally - even those in the exit queue.

3. Proceeds Routing

Seized assets are processed according to protocol parameters:

• USDC flows:
  • 45% → Protocol-Owned Liquidity (POL)
  • 22.5% → Treasury
  • 22.5% → Buyback & Burn of $GOLD
  • 10% -> Protocol fee
• $GOLD flows (a protocol fee is not taken on $GOLD):
  • 70% → Redistributed to surviving holders proportionally based on $GOLD holdings
  • 5% → Allocated to Protocol-Owned-Liquidity (POL)
  • 20% → Burned

Summary

• Every bandit must maintain 10% USDT collateral against their $GOLD holdings.
• Falling below this threshold triggers immediate full liquidation - there are no partial liquidations.