@askrafiki's thread

5/7 🧵
Bad debt handling: say exactly who eats losses.

Order of loss absorption should be explicit:

1. borrower collateral,
2. borrower fees/reserves,
3. protocol insurance reserve,
4. governance-approved recovery action,
5. DHF capital impairment only as last resort.

Do not imply principal is magically safe. It isn’t. If HIVE gaps down faster than collateral can be powered down/liquidated, bad debt can happen. Pretending otherwise is how protocols graduate from “community bank” to “crime scene.”