Liquidation

Liquitable Account

An account becomes eligible for liquidation whenever either of the following metrics breaches the market’s liquidation threshold.

$$Risk Ratio = \frac{\sum_{i}{f_i\cdot abs(S_i -B_i)}}{S -B}$$

$$Leverage = \frac{S}{S -B}$$

Liquidation thresholds : LiquidationRiskRatio and LiquidationLeverage are set at the market level.

To reduce Risk Ratio, a user can lower exposure to higher-risk assets.

To reduce Leverage, repaying a portion of the debt is most effective.

At high leverage, both metrics become more sensitive to price swings, so proactive management is critical.

Liquidation Process

1. Continuous Monitoring

   Constantly tracks each account’s Risk Ratio and Leverage, flagging any position that approaches liquidation thresholds

2. Action Preparation

   When a liquitable account is detected, liquidators (or automated bots) prepare to intervene, selecting the debt portion to be repaid and the collateral asset to seize

3. Execution

   The liquidator submits a transaction to repay part of the borrower’s outstanding debt. The repayment amount is capped by liquidationCloseRatio, ensuring only a limited slice of the position can be liquidated in a single event

4. Collateral Seizure

   In return, the liquidator claims the chosen collateral, receiving an extra incentive defined by liquidationBonus

Key Parameters

Parameter	Scope	Purpose
Liquidation Close Ratio	Market	Caps how much of a position can be liquidated in a single transaction, protecting borrowers from full liquidation at once.
Liquidation Bonus	Asset	Percentage premium awarded to liquidators, incentivizing fast action and maintaining market health.