Sumer.Money
  • Sumer.Money: The Most Capital Efficient Blockchain Liquidity Infrastructure
  • KEY PREMISE
    • The Future is Multichain
    • Sumer - the most capital efficient Liquidity Infrastructure
      • Sumer's Capital Efficient unified liquidity pool
      • Sumer Synthetic Assets as Money Multipliers
  • SUMER POINTS PROGRAM - A Call for the Tribe
    • Introduction
    • Points Based Program
    • NFT Based Program
    • Sumer Partner Program — Meter Points
    • FAQs
  • Sumer Lending and Borrowing Market
    • Introduction
    • Asset Group Classification
    • Collateral Rate by Asset Group
      • Understanding the applicable mint limit
    • Deposit Native Assets
    • Mint SuTokens
    • Borrow Native Assets
    • Repay SuToken Liability
    • Repay Borrowed Native Assets
    • ​Interest Rate Model
      • Standard Model
      • Jump (Kink) Model
    • Redeem SuTokens
    • Liquidation Mechanism
    • Risk Management
  • Tokenomics
    • Token Distribution
  • Definitions
  • Frequently Asked Questions
    • Sumer Protocol
    • Deposit Market
    • Minting Synthetic Assets (SuTokens)
    • Borrowing Market
    • Liquidation
  • TUTORIALS
    • How to Deposit assets
    • How to Collateralize Tokens
    • How to Mint SuTokens
    • How to Borrow assets
    • How to Stake Sumer LP tokens into Liquidity Program
    • How to stake Sumer Tokens into veSumer Program
  • SECURITY
    • Audits
  • PROTOCOL PARAMETERS
    • SUMER Money Market
  • DEVELOPERS
    • Smart Contracts
    • sdr Tokens
    • Price Feeds
      • RedStone Price Feeds on Zklink Nova
      • Pyth Price Feeds on Meter
      • Chainlink Price Feeds on Arbitrum
      • Chainlink Price Feeds on Base
  • GOVERNANCE
    • Introduction
Powered by GitBook
On this page
  • What is Liquidation?
  • How much is the liquidation penalty?
  • How can I avoid getting liquidated?
  • Can I participate in the liquidation ecosystem?

Was this helpful?

  1. Frequently Asked Questions

Liquidation

What is Liquidation?

A liquidation is a process that occurs when a borrower's Collateral Rate goes above the liquidation threshold due to their collateral value not completely covering their liability. This might happen when the collateral decreases in value or the borrowed debt increases in value against each other.

In a liquidation, a portion of a borrower's debt up to the close factor is repaid and that value + liquidation fee is taken from the collateral available, so after a liquidation that amount liquidated from your debt is repaid.

How much is the liquidation penalty?

The liquidation penalty (or incentive for liquidators) depends on the asset used as collateral.

How can I avoid getting liquidated?

To avoid liquidation you can raise your Collateral Ratio by depositing more collateral assets or repaying part of your loan. By default, repayments increase your health factor more than deposits. Also, it's important to monitor your Collateral Ratio and keep it low to avoid a liquidation.

Can I participate in the liquidation ecosystem?

Yes, liquidations are open to anyone, but there could be a lot of competition. Normally liquidators develop their own solutions and bots to be the first ones liquidating loans to get the liquidation bonus.

PreviousBorrowing MarketNextHow to Deposit assets

Last updated 10 months ago

Was this helpful?