Liquidation

This page will explain and illustrate the mechanisms related to liquidation.

Health Factor

How to understand the role of health factor in avoiding liquidation of an account?

The health factor can intuitively reflect the relationship between the assets borrowed and the collateralized assets of an account. In the DeFi field, the health factor is usually used to measure the relationship between the assets accepted and the collateralized assets of an account. Specifically, the health factor is a number used to represent the ratio of the value of the borrower's collateralized assets to the value of the loan. When this ratio drops to a preset threshold (in DEFED, the threshold is 1.0), the borrower's account may be forced to be liquidated to protect the lender's interests.

Liquidation Threshold

LTV=Borrow/Collateral
Token	MAX LTV	Liquidation threshold	Liquidation penalty
ETH	82.50%	85.00%	5.00%
WBTC	70.00%	75.00%	6.50%
USDC	85.50%	88.00%	4.50%
USDT	85.50%	88.00%	4.50%

More Info