Market Modes

To ensure the safety of lenders and borrowers, Dahlia offers robust emergency management options to handle unexpected disruptions or critical market events.

Pause Mode

Pause Mode is a safety mechanism designed to protect market participants during unexpected events, such as emergencies or disruptions. When a market is paused:

• Borrowing and lending activities are halted.

• Borrowers can still repay their debt.

• Lenders are allowed to withdraw their funds, though subject to any underlying losses that may have occurred.

The market remains in this state until the underlying issue is resolved and stability is restored. This can happen when:

• Market conditions normalize.

• Necessary actions are taken by the DAO or Market Admin to address the emergency.

Authority: The Market Admin and the DAO (Guardian Multisig) have the ability to pause or unpause a market, depending on the situation.

Deprecation Mode

Deprecation Mode applies to markets that are deemed unsafe or have insufficient deposits, rendering them inactive. Once deprecated:

• New borrowing and lending activities are permanently disabled.

• Borrowers can repay their debt.

• Lenders can withdraw their funds, similar to paused markets.

Deprecation is an irreversible action. If a similar market is needed, users can create a new market with the same parameters.

Authority: Only the DAO (Guardian Multisig) can deprecate a market.

Oracle Stalled Mode

If a market’s oracle becomes stalled — meaning one or more price feeds return badData (indicating the price has not been updated within the required delay and is no longer fresh) — Dahlia halts all actions that depend on oracle prices. This includes liquidations, new borrows, and collateral withdrawals.

To address a stalled oracle, there are two possible resolutions:

1. Oracle price feeds recover and start providing fresh prices again.

2. Oracle price feeds are irreparably broken, requiring an alternative mechanism to ensure funds are not stuck indefinitely.

In the event of an unresolved oracle issue, Dahlia can activate the Stalled Market Mode with the following process:

• A REPAY_PERIOD is initiated, during which borrowers can repay their full debt and reclaim their collateral. Lenders are unable to withdraw funds during this period.

• The REPAY_PERIOD lasts for 2 weeks by default but can be adjusted by the DAO (Guardian Multisig).

If borrowers fail to repay their debt within the REPAY_PERIOD, the following actions occur:

• Borrowers lose the ability to reclaim their collateral.

• Lenders gain access to the available liquidity and any remaining collateral, ensuring fair distribution of assets even without a functioning oracle.

This mechanism prevents liquidity from becoming permanently stuck in the protocol and provides a clear resolution path in the absence of reliable price data.

Authority: Only the DAO (Guardian Multisig) can trigger Oracle Stalled Mode.