Simulated Liquidation Cascade Tester

WHAT IT DOES

The Simulated Liquidation Cascade Tester is a DeFi risk analysis tool that simulates liquidation cascades across multiple positions in lending protocols. It takes user-defined positions (collateral and debt amounts), applies configurable price shocks, calculates which positions become liquidated, and tracks cascade effects where liquidations trigger additional liquidations. This helps DeFi protocol teams, risk analysts, and liquidity providers understand systemic risk, test protocol resilience, and optimize liquidation parameters.

HOW TO USE

Enter the protocol name and configure the liquidation threshold percentage. Set the price shock percentage to simulate a market drop. Add positions with each on a new line in the format: id,collateral,debt (in USD or any consistent unit). Click "simulate liquidation cascade" to run the analysis. The tool calculates health scores for each position, applies the price shock, identifies liquidated positions, and tracks cascade effects. Results display a summary of liquidations, cascade depth, position-level details, and visualizations of the impact distribution.

TECHNICAL MECHANISM

The tool calculates position health as the ratio of collateral to debt expressed as a percentage. A position is considered healthy if its collateral/debt ratio exceeds the configured liquidation threshold. When a price shock is applied, the collateral value is multiplied by a shock factor (1 - shock percentage). Positions whose health falls below the threshold after the shock are marked for liquidation. The tool then simulates cascade effects: liquidated positions remove their collateral and debt from the system, which can cause other positions to become unhealthy if the remaining system collateral-to-debt ratio drops below the threshold. The cascade depth tracks how many rounds of liquidations occur. Results are displayed with detailed position-level data, a health after shock column, and a visualization showing the proportion of healthy versus liquidated positions, as well as cascade depth indicators.

WHAT IT CANNOT SEE

The tool cannot execute liquidations on the live network. It cannot account for actual market conditions or price slippage. The tool cannot detect liquidation cascades that depend on real-time oracle updates. It cannot predict liquidity availability for liquidators. The tool cannot simulate protocol-level incentives or penalties beyond configured parameters. It cannot account for external factors like gas costs or MEV. The tool cannot validate that the position data is current without actual on-chain queries. It cannot simulate complex interactions between multiple protocols.

PLEASE NOTE

This tool is designed for Ethereum Virtual Machine (EVM) compatible chains but is protocol-agnostic. The simulation uses simplified assumptions and may not reflect actual protocol behavior. The cascade model is a simplified representation—real cascades can be more complex with interdependent positions. The tool provides estimates only and should be used for educational and risk assessment purposes, not as a substitute for actual protocol stress testing. Always validate with on-chain data and real market conditions.