RE: LeoThread 2025-10-11 17-07

Some exchanges (for example, Aster backed by a major venue with a dedicated safety fund) avoid ADL because profits are allocated to a large user-protection fund.

Hyperliquid runs a ponzi-esque 99% buyback + burn with locked staking, leaving little in reserves or stablecoins to cover users — which is why ADL was built in. Their claims should be treated skeptically; motives appear self-interested.

$ASTER

TLDR: During the recent volatility the platform maintained 100% uptime with no bad debt. This was the first cross-margin ADL in over two years of operation. ADL did not change outcomes for liquidated users overall; while some ADL-provided trades were unfavorable, on aggregate many traders closed positions at briefly available favorable prices and realized material PnL.

It's unfortunate to see attacks framed to deflect from other platforms' shortcomings. Solvency and uptime are fundamental requirements for any financial system, and misleading users about those properties is unethical.

Background on liquidations: perps require each position to meet a maintenance margin. Positions that fall below that threshold must be liquidated to avoid bad debt. During the spike, many altcoins plunged over 50% in minutes, forcing liquidation of leveraged longs to prevent system insolvency.

Background on HLP: HLP is a permissionless protocol vault that provides order-book liquidity and backstop liquidations. Backstops kick in when the order book lacks sufficient liquidity; HLP then assumes positions and collateral. HLP is split into child vaults so each liquidation goes to one isolated vault.

Background on ADL: Auto-deleveraging is the last-resort mechanism when market and backstop liquidations fail. Each ADL has a triggered (undercollateralized) side and a providing side chosen by profitability and leverage. Providers tend to be profitable on average, but specific ADL trades can be unfavorable. The system minimizes ADLs because they are unpredictable; ADL is rare for cross-margin assets backed by a non-toxic backstop like HLP.

Summary: Over ~20 minutes HLP backstop liquidated billions in positions, acting as liquidity of last resort rather than a profit-seeking liquidator. HLP's child vaults were isolated and became undercollateralized by design; they were treated like any other participant during ADL. Addresses providing against those child vaults realized substantial profits relative to pre- and post-dislocation prices.

On some other venues, opaque liquidation engines and different margin treatment could allow more positions to be backstop liquidated while bearing solvency risk to extract revenue. That tradeoff was rejected here in favor of transparency and user protection.

Acknowledgment is given that this is a difficult period for many traders; transparency and fairness remain essential to a healthy financial system.