The Llama DAO liquidation platform’s debt auction mechanism triggered a significant event, resulting in a 70% asset discount. When collateral values in Llama’s vaults fell below the required liquidation ratio, automated keepers initiated auctions to recover outstanding debts. The mechanism, designed to stabilize the platform’s stablecoin, involved a two-phase auction: initial bids to cover debt, followed by a reverse auction for reduced collateral. However, extreme market volatility and low bidder participation led to aggressive price drops, causing assets to be sold at a 70% discount. This raised concerns about the platform’s risk management and auction design, prompting community discussions on adjusting parameters to prevent such steep losses in future liquidations. Users are now urged to monitor vaults closely to avoid similar outcomes.