LienTokens
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.
LienTokens
have a payee field that is initially set to the LienToken
owner (its Vault). The payee receives all loan payments, as well as auction funds if the underlying collateral is liquidated. If auction funds need to be paid out to withdrawing liquidity providers for a PublicVault
, payee is permanently set to the address of a WithdrawProxy
for the current epoch.
Liquidations
When the underlying collateral for a LienToken
is liquidated, recovered auction funds are repaid in order of seniority. The first LienToken
must be fully paid back from auction before the second LienToken
may begin receiving funds, and so on, until there are no funds remaining. Any excess funds after all LienTokens
have been paid back are returned to the initial liquidated borrower.