Summary
This proposal outlines a structured and orderly wind-down of the Mars Protocol.
Following recent developments and an assessment of long-term viability, contributors propose to gradually reduce borrowing capacity across all assets, fully unwind all outstanding debt positions, and ultimately close the protocol in a controlled and transparent manner.
The objective is to:
- Eliminate all remaining debt in the system
- Return remaining funds to depositors
- Minimize systemic risk during the process
- Conclude protocol operations in an orderly way
Motivation
After evaluating the current state of the protocol, including:
- Reduced growth prospects
- Operational overhead
- Governance and coordination complexity
- Long-term sustainability considerations
contributors believe that continuing normal operations no longer serves the best interest of the protocol and its users.
An orderly wind-down allows:
- Predictable de-risking
- Clear communication to users
- Controlled reduction of leverage
- Transparent closure process
This proposal ensures no abrupt shutdown and gives market participants sufficient time to react.
Proposed Wind-Down Timeline
Wind-down period:
24 February 2026 → 21 March 2026
Phase 1, Gradual Risk Reduction (24 Feb – 20 Mar)
- Liquidation LTVs across all collateral assets will be reduced gradually.
- Target reduction: approximately ~3% per day.
- This progressively tightens borrowing capacity.
- Borrowers are expected to:
- Repay debt
- Add collateral
- Close positions voluntarily
This phase allows the system to naturally unwind leverage.
Phase 2, Final Deleveraging (21 March 2026)
On 21 March 2026:
- All liquidation LTVs will be set to 0
- Any remaining borrow positions will be liquidated
- Final migration will be executed
- Remaining funds will be prepared for redistribution
At this point:
- No outstanding debt will remain in the system
- Protocol contracts will move toward final closure state
Post-Deleveraging Process
Once all debt is cleared:
- Remaining assets will be reconciled
- Depositors will receive their proportional remaining funds
- Smart contracts will be disabled or migrated to final state
- Mars Protocol will cease operations
Risk Considerations
- Gradual LTV reduction mitigates sudden market shock
- Public timeline allows borrowers to adjust positions
- No immediate liquidation event is triggered at proposal approval
- The stepwise reduction approach prioritizes system stability
What This Proposal Does NOT Cover
- This proposal concerns Mars Protocol only
- It does not cover any external or independent protocols
- It does not modify token supply mechanics
- It does not introduce new incentives or rewards
Governance Process
- Forum discussion period: 5 days
- 3 days on-chain vote to follow
- Execution to begin on 24 February 2026 if passed
Conclusion
This proposal aims to conclude Mars Protocol operations responsibly and transparently.
The gradual wind-down approach provides clarity, fairness, and predictability for all remaining participants while ensuring the system exits in a clean state.
Contributors welcome community feedback before moving to an on-chain vote.
Copyright
Copyright and related rights waived via CC0.
Disclaimers/Disclosures
This proposal is being made by Mars Protocol Foundation, a Cayman Islands foundation company. Mars Protocol Foundation engages in research and development of the Mars Protocol. Mars Protocol Foundation and certain of its service providers and managers own MARS tokens and have financial interests related to this proposal. The aforementioned persons or their affiliates may also have financial interests in complementary or competing projects or ecosystems, entities or tokens, including NTRN. These statements are intended to disclose relevant facts and to help identify potential conflicts of interest, and should not be misconstrued as a complete description of all relevant interests or conflicts of interests; nor should they be construed as a recommendation to purchase or acquire any token or security.
This proposal is also subject to and qualified by the Mars Disclaimers/Disclosures. Mars Protocol Foundation may lack access to all relevant facts or may have failed to give appropriate weighting to available facts. Mars Protocol Foundation is not making any representation, warranty or guarantee regarding the accuracy or completeness of the statements herein, and Mars Protocol Foundation shall have no liability in the event of losses or damages ensuing from approval or rejection or other handling of the proposal. Each user and voter should undertake their own research and make their own independent interpretation and analysis of all relevant facts and issues to arrive at their own personal determinations of how to vote on the proposal.