Cover for borrowers on other lending markets, against the cost of being liquidated.
Who it serves. Borrowers on lending markets such as Aave and Morpho, whose positions are liquidated when a price moves.
How it is composed. An underwriter's obligation to pay the borrower if the external market liquidates the position, secured by a lien on the underwriter's collateral and priced by auction. The external position is read through a resolver named when the cover is created, and the read is disclosed with it.
What a liquidation costs the borrower is the penalty — the bonus paid to the liquidator, plus slippage — not the collateral seized, which repays the debt. The payout is capped at that penalty.
What is different. The cover uses no price feed of its own: it reads the other market's on-chain state, and every such read is disclosed per obligation, by target.
It changes nothing on the other market: the position stays there, under that market's rules. Gavel enforces only on what is in its own vault.
Status: Idea. Cover for borrowers on other markets is deferred in the design, to be taken up with the options work.
Caveats. The Gavel Protocol has no affiliation with Aave or Morpho; they are named only to say which markets such cover could read.
Whether a liquidation happened is decided by the other market, under its own rules and its own price feeds. The cover depends on that market's contracts, which may change.
A borrower could let a position fall and liquidate it from another wallet, collecting both the liquidator's bonus and the payout; nothing on-chain links the two wallets. The design has not yet resolved this.
It pays the penalty, not the collateral seized. It does not prevent a liquidation.
Nothing described here is deployed; the v2 contracts are unaudited.
Nothing on this page is an offer to provide this instrument or a recommendation to use it. The v2 contracts are unaudited.
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