LienTokens are tokenized debt positions created and held by Vaults upon loan origination. Each
LienToken contains relevant information for the loan it represents (see
Loan Terms). When a lien is fully paid off, its
LienToken is burned.
LienTokens may be purchased for a reserve amount that is equal to the remaining debt on the lien with an additional penalty to compensate the gas costs of loan origination.
When the underlying collateral for a
LienToken is liquidated, all received auction funds are used to repay the lien before being returned to the borrower. Any excess funds after the
LienToken has been paid back are returned to the initial liquidated borrower.