Liquidations
Liquidation Flow Diagram
Liquidator
Repays debt to earn rewards
Repay Debt
Seize Collateral
Unhealthy Position
Health Factor
0.99
Liquidatable
When a position's Health Factor drops below 1.0, liquidators can repay a portion of the debt in exchange for seizing collateral at a discount. This process helps maintain protocol solvency.
Liquidations occur when a borrower's Health Factor drops below 1.0, making their position eligible for liquidation. Liquidators can repay part of the debt in exchange for seizing collateral at a discounted rate.
How Liquidations Work
1.
When Health Factor < 1.0, the position becomes liquidatable
2.
Liquidators can repay a portion of the debt in exchange for seizing collateral at a discounted rate (liquidation bonus)
3.
The borrower's position is rebalanced and Health Factor improves
4.
Excess collateral beyond the liquidation bonus remains with the borrower