Liquidation
The liquidation process occurs when another user repays part of the outstanding amount of the borrower and thus purchases his collateral at a discount.
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.
Last modified 1yr ago