Liquidations

Liquidation is permissionless, but someone must submit the transaction. There is no required margin call or grace period once a position becomes eligible.

When it triggers

A position becomes eligible when its health factorfalls below 1.0 and a valid price exists. Two things can get it there:

• The collateral falls. The usual cause. With equity collateral the fall often arrives in one step at the market open rather than gradually overnight.
• The debt grows. Interest accrues continuously, including while the market is closed. A position parked near the line long enough will cross it without the price moving at all.

How it works

1. 1
   A liquidator sees a health factor below 1.0 and calls the pool.
2. 2
   They repay a portion of your USDG debt out of their own pocket.
3. 3
   In return the pool hands them collateral worth that repayment plus a liquidation bonus.
4. 4
   Your debt shrinks by what they repaid; your collateral shrinks by rather more. The difference is the bonus, and it is the whole cost of the event to you.
5. 5
   If the position is still unhealthy, it can be liquidated again.

The bonus on this market is set wider than a typical crypto market's, and not as a punishment. A liquidator has to sell the seized stock token to get their capital back, and on a young chain with thin DEX depth that takes a real incentive. A market nobody wants to liquidate in is far more dangerous than one where liquidation is expensive.

Liquidation is independent of borrowing hours

Liquidation needs a valid collateral valuation. It is blocked when that stock feed is too old, the issuer is paused, the answer is outside the adapter's scale-error band, or a corporate action is unresolved. USDG debt is valued at a fixed $1, so a USDG feed outage or depeg does not stop liquidation.

The 24/5 calendar, AWS certificate and reporter liveness apply only to new borrowing. The borrow sentinel always permits liquidation. Liquidation can therefore continue outside regular trading hours and during an AWS outage whenever the direct collateral price is valid and the reserve is not paused.

The asset borrow gate sets LTV to zero without changing the liquidation threshold or bonus. It stops additional borrowing against that stock; it does not cancel existing debt or prevent liquidation when the required valuation is valid.

What you keep

You keep the USDG you borrowed (it was already yours to spend) and whatever collateral was not seized. A normal liquidation repays debt and takes collateral plus the published bonus. A severe gap can consume all supplied collateral and still leave unpaid debt in the pool, so overcollateralisation is a starting condition, not a guarantee against bad debt.

Avoiding it

• Borrow well under the limit. The single most effective thing you can do. Max LTV is where the protocol stops you, not a target.
• Respect the market calendar. Go into a weekend, a holiday or an earnings date with more headroom than you hold midweek.
• Act early, not at the line. Repaying or topping up when the health factor first slips is cheap. Doing it at 1.05 is a race you may lose.
• Keep gas. Every defensive action is a transaction, and being unable to sign one is an avoidable way to get liquidated.
• Remember concentration. An isolated position rests on one asset. A single name can gap on one earnings report; a private-company mark can be revalued without any market at all.