Trigger
Liquidation can occur when HF < 1.0 (see Health Factor).Anyone can liquidate you. There’s no queue or warning period once HF < 1.0.
What happens
- A liquidator repays part (or all) of your debt
- They receive your collateral plus a bonus
- Your debt decreases, HF may recover
Bonus curve
The bonus incentivizes faster liquidation of riskier positions:| Health Factor | Typical Bonus |
|---|---|
| ~1.0 (just liquidatable) | ~5% |
| ~0.9 | ~10% |
| ≤ 0.8 | ~15% (max) |
A portion of the bonus (default 10%) goes to the protocol treasury. This fee comes from the bonus, not your debt repayment.
Partial vs full liquidation
Liquidation aims to restore you to a target HF (default 1.05) rather than wiping you out. But if your position is severely underwater or would leave “dust” debt, full liquidation may occur.Why liquidation can be delayed
Liquidation has stricter oracle rules than normal borrowing:- If any collateral has an unavailable price → liquidation blocked
- After oracle recovery from a stale gap → grace period (default 5 minutes)
Bad debt
If collateral value < debt after full liquidation, the remaining debt is “bad debt”:- Protocol reserve absorbs first
- Any remainder is socialized to lenders (reduced share price)
You lose all collateral but don’t owe the protocol anything beyond that. There’s no personal liability for bad debt.