# Unwind and Peg Module

Unwinds close unsafe accounts by selling collateral and burning rwaUSD to extinguish liability.

#### Unsafe condition

An account is unsafe if:

* `collateralValue < currentLiability * safetyFactor`

Using **risk-adjusted prices** (haircut included) and **freshness policy**.

#### Who can trigger

Anyone can trigger an unwind. This is deliberate. The system does not depend on a privileged actor for solvency.

#### Unwind Engine (`UnwindEngine`)

**Responsibilities**

* verify unsafe condition via Ledger + PriceRouter
* freeze account operations
* determine amount of collateral to seize (enough to target full settlement + penalty, using conservative price)
* initiate auction(s)

**Interfaces**

```solidity
function trigger(uint256 accountId, bytes32 profileId) external returns (uint256 auctionId);
function getStatus(uint256 accountId) external view returns (...);
```

#### Incentives for callers (keepers)

To avoid relying on altruism, add a keeper reward:

* fixed “call fee” paid from reserve buffer (bounded), and/or
* percentage of recovered value (capped)

Reward must be parameterized per profile and capped to prevent griefing.

***

### Auction system <a href="#auction-system" id="auction-system"></a>

#### **Auction House (`AuctionHouse`)**

Sells seized collateral for rwaUSD (or for a reference stablecoin that is immediately converted and burned, implementation choice). **Preferred mechanism here is** descending-price sale with partial fills.Why:

* fast convergence
* simple keeper strategy
* handles volatile conditions better than thin order books

#### **1. Auction parameters (per profile)**

Stored in RiskRegistry:

* `startPremium`: multiplier on reference price at start (e.g., 1.05×)
* `decayCurve`: price decay function over time
* `duration`: max auction time
* `lotSize`: collateral per lot (or debt target per lot)
* `minFill`: minimum purchase size
* `restartThreshold`: if auction runs too long or price too low, allow restart

#### **2. Auction lifecycle**

1. **Kick**
   * Unwind Engine calls `AuctionHouse.kick(...)`
   * collateral is transferred from adapter to auction custody
   * auction state created:
     * `collateralRemaining`
     * `debtTarget` (liability + penalty)
     * `startTime`
     * `startPrice`
2. **Take (purchase)**
   * bidder calls `take(auctionId, collateralAmtWanted, maxPrice)`
   * contract computes current price
   * bidder pays `cost = collateralAmtWanted * price`
   * rwaUSD is transferred from bidder and burned via Ledger
   * collateral transferred to bidder
   * debt target reduced accordingly
3. **Settle**
   * if debt target is fully covered:
     * remaining collateral returned to original account owner (or kept to cover fees; policy)
     * Ledger marks the account cleared for that profile
   * if auction expires with remaining debt:
     * record deficit
     * resolve via buffer/recap

#### **3. Restricted collateral holders (allowlists)**

If a tokenized RWA requires allowlisted holders:

* Auction House must be an eligible holder
* Bidders must be eligible holders **or**
* Auction transfers a receipt/wrapper token representing claim on the collateral, redeemable through an eligible channel

v1 avoids “receipt complexity” unless unavoidable; it introduces a second custody layer.

***

### Peg anchoring rails <a href="#peg-anchoring-rails" id="peg-anchoring-rails"></a>

A peg rail provides a deterministic conversion between rwaUSD and a reference stablecoin to tighten market price.

#### 1. Peg Rail (`PegRail`)

**Concept**

* swap reference stablecoin ↔ rwaUSD near 1:1 with a fee spread

**Functions**

```solidity
function swapIn(uint256 stableIn, address to) external returns (uint256 rwaUsdOut);
function swapOut(uint256 rwaUsdIn, address to) external returns (uint256 stableOut);
```

**Rules**

* `swapIn` mints rwaUSD and holds stable in reserves (or routes to buffer)
* `swapOut` burns rwaUSD and releases stable from reserves

**Safeguards**

* per-day outflow limits
* depeg breakers: if reference stable price < threshold, disable `swapOut`
* governance-controlled fee bands within caps

The peg rail is not a substitute for solvency. It is a market tool.<br>