Liquidation
Last updated
Last updated
When the total borrowed exceeds the borrowable amount , the loan can be liquidated by a third party:
When a third party liquidates a loan, they select a single borrow to repay and a single collateral to seize. The maximum amount , they can liquidate is given as a percentage (e.g. 50%) of the borrow balance β:
To incentivise third parties to liquidate other usersβ under-collateralized loans, a liquidation bonus is earned. If there is insufficient balance of the chosen collateral, then at most the full collateral balance will be seized.
A portion of the liquidation bonus is kept by the protocol as revenue, as determined by the liquidation fee , Any remaining collateral that is not retained by the protocol, will be earned by the liquidator.