Liquidations

Introduction

A liquidation is a process that occurs when a borrower's Borrow Limit Used goes over 100% 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.

In a liquidation, 50% of a borrower's debt is repaid and that value + liquidation fee is taken from the collateral available, so after a liquidation that amount liquidated from your debt is repaid.

Example

When Borrow Limit Used >100%(Liquidation Line), a liquidator will be able to call the liquidation contract to use part of your collateral to pay your debt. After liquidation, your Risk Rate shall be below 100%. If in any case, it drops above 100% again due to further price fluctuation, the liquidation process will happen again.

Example, if you have supplied 2,000 USDT and your borrow in AVAX is $1,000 worth. When liquidation happens due to the increasing of the AVAX price, The liquidator will exchange his AVAX for your collateralized USDT until your borrow limit used is bellow 100%.

To avoid liquidation you can raise your risk rate by supplying more collateral assets or closing position to repay your borrow.