Liquidation
Last updated
Last updated
Liquidation kicks in when a borrower’s health factor drops below 1. This means their collateral no longer has enough value to fully cover their loan/debt. This can happen if the collateral loses value or if the borrowed debt increases relative to the collateral.
This collateral-to-loan value ratio is reflected in the health factor. During liquidation, the borrower's debt is repaid, a liquidation fee is deducted, and the remaining collateral (if any) is returned to the borrower.
The health factor is like your position’s overall wellness score. It measures how well your collateral (the assets you’ve deposited) stacks up against your debt (the assets you’ve borrowed) plus any accrued interest.
As a quick reference, here’s how to understand your health factor:
💀 Liquidated
1.0 or below
Your position has been liquidated
🚨 Danger zone
1.01 - 1.10
You are very close from being liquidated.
⚠️ Cautious Zone
1.10 - 1.50
You are moderately safe from being liquidated
✅ Safe Zone
Above 1.51
You are relatively safe from being liquidated
While these health factors indicate that you are currently safe from being liquidated, a significant drop in collateral value or a large increase in debt might drastically reduce your position's health factor.
The Liquidation Penalty Fee is a fee applied to the collateral when liquidators purchase it as part of the liquidation of a loan that has crossed the liquidation threshold.
Example 1 - JLP Leverage Bob deposits 100 USDC and borrows 400 USDC to enter a 5x JLP leverage position. This gives Bob a starting health factor of 1.125. If the price of JLP drops and the health factor falls to 1.00, the liquidator will take over the position and repay the borrower with 400 USDC.
In return, the liquidator will exit the position by selling all the JLP to recoup the borrowed assets.
Example 2 - INF Leverage Bob deposits 1 SOL and borrows 2 SOL to enter a 3x INF leverage position. This gives Bob a starting health factor of 1.125. If INF loses its peg to SOL, drops in price, and the health factor falls to 1.00, the liquidator will take over the position and repay the borrower with 2 SOL.
In return, the liquidator will exit the position by selling all the INF to recoup the borrowed assets.
To avoid liquidation, users can choose lower leverage or utilize Safety Mode features like Emergency Eject and Liquidation Saver.
Not at this moment.
Right now, Pluto uses the new to calculate the price of assets. It’s a high-performance oracle that aggregates real-time data from a wide range of sources, ensuring that our pricing is both precise and up-to-the-minute.
The liquidation threshold is the percentage at which a loan is considered under-collateralized. Every leveraged vault borrows a different asset and is used differently, so they each have a unique Liquidation Threshold, which is defined in the section.
This fee varies depending on the collateral asset. You can find the specific Liquidation Penalty Fees for each asset in the section.
