Mechanism

1. Core Mechanism

In the ALA model, participants express their interest in liquidations by depositing funds into pools, each representing a percentage of the collateral’s value they are willing to bid for. The ALA process operates through asynchronous capital calls that activate in response to liquidation events, summoning liquidity incrementally from the smallest to the largest bid pools until the entire liquidation amount is covered.

The mathematical structure of the ALA mechanism can be represented as:

Where:

• L = Total liquidation amount required

• Ci​ = Collateral received by the participant in the bid pool i

• Pi​ = Percentage increment of the bid pool i

• n = Number of bid pools

This formula helps concentrate liquidity across different chains, making the ALA mechanism a highly adaptable solution for diverse blockchain environments.