Liquidations

Liquidation is the process of taking a borrower's Collateral to repay their debts.

Liquidators play an important role in keeping the money market solvent by repaying an Account's debt when it falls below an Account Health of 1.0.

Partial Liquidation Threshold

The Partial Liquidation Threshold is a value that allows small accounts to be liquidated entirely, even if the liquidation brings the account health above its Target Liquidation Health.

Dynamic Liquidation Premiums

To encourage competition among liquidators, Neptune has introduced Dynamic Liquidation Premiums that vary between a MIN and MAX for each collateral asset.

When account health falls below 1.0, a dynamic premium creates competition among searchers to liquidate accounts quickly and at the lowest cost to the borrower. However, if an account’s health continues to drop, a dynamic premium increases the profit potential for liquidators and helps mitigate bad debt Risk.

Liquidators

Liquidators follow an automated process of paying down an unhealthy account's borrowed funds. In this process, liquidators repay the account's debt until the account is brought back to its Target Liquidation Health. The liquidation process is permissionless so anyone can participate. 

Liquidators are advised to review the Developer Docs.

Target Liquidation Health

The Target Liquidation Health is a variable that determines the maximum value of debt that can be repaid in one liquidation event. At launch, this parameter is set to 1.03.