The liquidation process occurs when another user repays part of the outstanding amount of the borrower and thus purchases his collateral at a discount.

How much is the liquidation bonus/penalty?

The liquidation bonus (or penalty for borrowers) depends on the collateral asset.

Example: Alice deposits 100 TEZ and borrows 500 tzUSD. The Health Factor drops below 1 and its loan is liquidated. A liquidator can repay up to 50% of a single borrowed amount = 250 tzUSD. In return, the liquidator can claim single collateral which is TEZ ( for example, with a 5% bonus). The liquidator claims 50 TEZ + 2.5 TEZ for repaying 250 tzUSD.

Pay attention: you need to take into account Tezos fees.

Can I participate in the liquidations?

Each user can take part in the liquidation. However, there are a lot of people who want to close someone else's loan, and liquidators have to develop their own solutions in order to liquidate loans and receive bonuses first.

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