Liquidation

Liquidation happens when a borrower’s Health drops below 1 due to the value of their collateral not properly covering their loan/borrowed value.

This happens when the collateral decreases in value or when the borrowed debt increases in value against the collateral.

The collateral vs loan value ratio is shown as Health. In a liquidation, a borrower’s debt is repaid and that value plus a liquidation fee is taken from the available collateral.