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# Liquidation

When the total borrowed
$TB_t$
exceeds the borrowable amount
$BA_t$
, the loan can be liquidated by a third party:
$TB_t>BA_t$
When a third party liquidates a loan, they select a single borrow to repay and a single collateral to seize. The maximum amount
$C$
, they can liquidate is given as a percentage
$liquidation.max$
(e.g. 50%) of the borrow balance
$BB_t$
​:
$C\leqslant BB_t*liquidation.max$
To incentivise third parties to liquidate other users’ under-collateralized loans, a liquidation bonus
$liq.bonus$
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
$liq.fees$
, Any remaining collateral that is not retained by the protocol, will be earned by the liquidator.