🌊Liquidations

A critical process, which is triggered when a borrower's health factor falls below 100% due to their collateral value not adequately covering their loan or debt value.

This might happen when the collateral decreases in value, or the borrowed debt increases in value relative to each other. This collateral-to-loan value ratio is reflected in the health factor, based on the borrowing power, or Max LTV, of each collateral asset.

Liquidations are triggered by Oracle price feeds and managed by liquidator bots ran internally and by third parties. A liquidation penalty is applied to the value of the collateral during liquidation, serving as an incentive to execute the liquidation.

Liquidations are open source and permissionless. Visit Running a Liquidator Bot to learn more.