Proposal for Liquidation Protection Mechanisms in World App Integration

Governance
1

I’m a Morpho user via World App. I was liquidated during the market crash on 10/11 and would like to propose technical improvements.

【Current Challenges】

  • World App integration only supports manual management with no external automation tool connectivity
  • Human reaction time is insufficient for volatile collateral assets (e.g., WLD)
  • 24/7 monitoring is impractical considering global user time zones

【Technical Proposals】
Features implementable at the Morpho protocol level:

  1. Conditional Order Functionality

    • Users pre-set conditional transactions (e.g., “repay Y USDC if HF < X”)
    • Integration with oracle networks like Chainlink Automation
    • Gas fees automatically deducted from user collateral

  2. Gradual Liquidation Implementation

    • Minimal liquidation to restore HF instead of full liquidation
    • Tiered liquidation penalty application

  3. World App Integration-Specific API

    • Automated approval mechanism linked with World ID
    • Maintains human authentication while enabling auto-execution within pre-approved parameters

【Reference Examples】

  • Aave V3’s EMode and Isolation Mode safety features
  • Liquity’s gradual liquidation mechanism

More user-friendly liquidation protection for mainstream app integrations like World App would further drive Morpho adoption.

1 Like
2

Good suggestion. At that time, the WLD price dropped by 80% within just a few minutes, making it impossible to react even if one was online at the time. For the USDC/WLD pair, liquidation occurs when the ratio reaches 77%, so I believe almost everyone who used the borrow feature was liquidated. I think such an unreasonable situation created victims rather than reflecting users’ carelessness. While I don’t have high expectations, I believe proper compensation should be provided to the affected users. I heard that Binance has already offered compensation for the victims of the incident. Who receives the liquidated WLD — Morpho or Re7 Lab? I hope the entity that recovered the liquidated WLD returns it to the affected users.

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