Liquidation
CDP liquidation
Your CDPs will be liquidated when the position collateral ratio falls below liquidation threshold(MCR). Maximum liquidation amount is calculated so that the CDP's CR is at least 5% more than MCR to better protect borrowers' interest, unlike protocols such as AAVE and Compound, in which a CDP can be liquidated as much as 50% of its debt. Liquidation will increase MCR of liquidated CDP,
Liquidation bonus for liquidators
There is a penalty to borrowers when CDPs are liquidated, the penalty is rewarded to liquidator as liquidation bonus.
Liquidation bonus for liquidity providers
Liquidation bonus = LPP * liquidated debt amount, bonus is paid in form of collateral.
LPP = Liquidation Penalty Percentage
LPP is not fixed, when a CDP reaches its MCR threshold, LPP will increase by 1% for every 1% CR(Collateral Ratio) drop, actual LPP = LPP Base + (MCR-CR).
For CDPs with multi-collateral, LPP Base = ($Collateral A * BaseA + $CollateralB * BaseB)/($Collateral A + $CollateralB)
Collateral Type | LPP Base |
---|---|
WBTC | 5% |
WETH | 5% |
APT | 5% |
Sui | 5% |
USDC | 3% |
USDT | 3% |
DAI | 3% |
OT | 7% |
OSD | 5% |
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