What is debt liquidation?

When the user’s health factor is less than 1.0, the system will liquidate the user’s collateral. After the liquidation, if the health factor is greater than 1.0, it will no longer participate in the liquidation, otherwise the system will continue to participate in the liquidation until the user’s collateral cannot afford the repayment, and the system will be as the final liquidator, which is repaid by the risk reserve fund.

Note: The liquidator can restore the user's health factor by auction to 1.05 at most each time.

The specific liquidation process are as follows:

(1) When the health factor of the debt user is less than 1.0, enter the liquidation queue.
(2) The liquidators conduct auctions to help the debt user recover the health factor, which can reach a maximum of 1.05. If the amount of the auction exceeding the threshold is not involved in the auction, it will be refunded to the liquidator.
(3) If the debt user's health factor of the debt is greater than 1.0 after the auction, the debt user will immediately withdraw from the liquidation queue.
(4) If the health factor of the debt user is still less than 1.0 after the auction, it will continue to re-enter the liquidation queue.
(5) In extreme cases such as unilateral continuous market conditions, the system will be the final liquidator and the risk reserve will be used to repay.