💥Liquidations

Introduction

A liquidation is a process that occurs when a borrower's collateralization ratio drops, due to their collateral value not properly covering their loan/debt value. This might happen when the collateral decreases in value or the borrowed debt increases in value against each other. Keep your health factor ratio above 1.1 to avoid being liquidated!

How much is the liquidation penalty?

The liquidation penalty (or bonus for liquidators) depends on the asset used as collateral. You can find them in the parameters below. The most up to date details are on markets page.

Ethereum

Asset	Maximum HF (Global)	Liquidation Bonus	Max Liquidation Portion
USDC	3.4	1.072	0.5
USDT	3.4	1.061	0.5
WBTC	3.4	1.065	0.5
WETH	3.4	1.072	0.5
wstETH	3.4	1.097	0.5

Arbitrum

Asset	Maximum HF (Global)	Liquidation Bonus	Max Liquidation Portion
ARB	3.4	1.121	0.5
USDC	3.4	1.072	0.5
USDT	3.4	1.087	0.5
WBTC	3.4	1.085	0.5
WETH	3.4	1.069	0.5
wstETH	3.4	1.088	0.5

Optimism

Asset	Maximum HF (Global)	Liquidation Bonus	Max Liquidation Portion
OP	3.4	1.126	0.7
USDC	3.4	1.072	0.5
USDT	3.4	1.075	0.7
WBTC	3.4	1.089	0.7
WETH	3.4	1.069	0.7
wstETH	3.4	1.085	0.7

How can I avoid getting liquidated?

To prevent liquidation, you can either deposit more collateral or repay some of your loan. Generally, repaying loans boosts your health factor more effectively than making deposits. Regular monitoring of your HF is key to avoiding liquidation. Aiming to maintain your Health Factor above 1.5 provides a good buffer to avoid liquidation.

Be aware of sudden price shifts due to market conditions, which can impact your HF. For instance, even stablecoin's value might change. USDC's market value might deviate from its usual 1:1 ratio with USD, affecting your collateral value. Fluctuations in stablecoin prices, like any asset, influence your HF. Further details on oracles and risk are provided here.

If you want to learn more about liquidations - checkout our Liquidations Breakdown in Developer Docs.