What is liquidation?

The protocol will start the liquidation process when the Current LTV of the Pool exceeds the Critical LTV. The Pool will go into the liquidation state and you will no longer be able to make any trades on the Pool while the liquidation is in progress.

How does it work?

Any user can act as Liquidator by initiating the Pool Liquidation Process. The purpose of this process is to return the LTV of the Pool to being below the Reset LTV. The protocol implements this using a forced repayment process

The Liquidator gets a discount on the Pool assets as a reward for reducing the risk in the pool.

The Liquidation Initiator has 1 minute exclusivity after the change of state of the pool into Liquidation State to buy pool assets (proportionately) at a discount (based on Liquidation discount table) in exchange for one or several tokens that the pool owes. The Liquidator will continue until the Pool LTV is below the Reset LTV. After the first minute, any user can act as Liquidator and buy assets in the portfolio at a discount in exchange for one or several tokens that the pool owes.

After the Current LTV of the Pool is below the Reset LTV, the state of the Pool will be taken out of Liquidation and the owner will be able to make trades as well as deposit or withdraw funds again.

How much is the liquidation discount?

It’s based on the amount of the asset due to be liquidated and the current volatility regime for this asset.

How can I avoid getting liquidated?

Keep Loan-to-value of the pool below Maintenance/Critical LTV at all times.

Can I participate in the liquidations ecosystem?

Definitely. Anyone can.