Liquidation

Introduction

Liquidation occurs when a borrower's health factor goes below 1 due to their collateral value not properly covering their loan/debt value. This can happen as a result of the decreasing collateral value and/or increasing debt value from accumulated interest.

How To Avoid Getting Liquidated

To avoid liquidation you can raise your health factor by depositing more collateral assets or repaying part of your loan.

It's also important to monitor your health factor and keep it high to avoid liquidation. For example, keeping your health factor over 2 gives you more of a margin to avoid liquidation.

Isolated Liquidations

Each debt position will have its own Healt Factor and its LTV. If one of your NFTs get's liquidated, this will not affect the other NFTs deposited. For this it will be necessary to monitor the Health Factor of all the deposited NFTs.

Can You Become A Liquidator?

Meltlabs NFT holders will have access to our bot, allowing them to earn passively simply by holding our NFT.