> ## Documentation Index
> Fetch the complete documentation index at: https://docs.edel.finance/llms.txt
> Use this file to discover all available pages before exploring further.

# Liquidations

> How positions are liquidated when health factor drops below 1.0

<Frame>
  <img src="https://mintcdn.com/edelfinance/RAmQMxLSnNZx1q3j/images/Liquidations.jpg?fit=max&auto=format&n=RAmQMxLSnNZx1q3j&q=85&s=0201a84093e6bee23efb29f231149a40" alt="Liquidation process diagram showing automated risk management" width="1920" height="1080" data-path="images/Liquidations.jpg" />
</Frame>

Liquidation is an automated process that protects lenders and the protocol when a borrowing position becomes unsafe.

## When Liquidation Happens

Your position becomes eligible for liquidation when your **Health Factor (HF) \< 1.0**.

This can occur when:

* Collateral value decreases
* Borrowed amount grows through accrued interest
* Or both combined

***

## The Liquidation Process

<Steps>
  <Step title="Liquidation Triggered">
    Any participant can liquidate your position once HF \< 1.0
  </Step>

  <Step title="Debt Repayment">
    Liquidator repays up to **50%** of your outstanding debt (close factor = 0.5, asset-specific)
  </Step>

  <Step title="Collateral Seized">
    Liquidator claims equivalent collateral value **plus a liquidation bonus** (5–15%, asset-specific)
  </Step>

  <Step title="Position Restored">
    Your remaining position is brought back above the liquidation threshold
  </Step>
</Steps>

***

## Examples

<Tabs>
  <Tab title="Single Collateral">
    Alice supplies 100 tokenised AAPL shares and borrows \$5,000 USDC. If HF \< 1.0:

    * Liquidator repays \$2,500 USDC of Alice’s debt
    * Receives USD 2,500 worth of AAPL + 5% bonus (additional \$125 in AAPL)
    * Alice retains USD 7,375 worth of AAPL and USD2,500 debt
  </Tab>

  <Tab title="Multiple Collateral">
    Alice supplies USD 5,000 worth of tokenised TSLA and USD 4,000 worth of tokenised MSFT, then borrows \$5,000 USDC. If HF \< 1.0:

    * Liquidator chooses TSLA (higher 15% bonus vs MSFT’s 5%)
    * Repays USD 2,500 USDC
    * Receives USD 2,500 worth of TSLA + 15% bonus (\$375 in TSLA)
  </Tab>
</Tabs>

***

## Mechanics

* **Close Factor**: Max share of a borrower’s debt that can be liquidated in one tx (typically 50%).
* **Liquidation Bonus**: Incentive given to liquidators, set per-asset (5–15%).
* **Partial vs Full**: Liquidations are partial until HF > 1.0. Only if collateral collapses entirely might a position be fully liquidated.

***

## Who Can Liquidate?

<CardGroup cols={2}>
  <Card title="MEV Bots" icon="bot">
    Automated actors monitoring HF in real time; they liquidate instantly when profitable.
  </Card>

  <Card title="Individual Users" icon="user">
    Anyone can manually liquidate using protocol interfaces.
  </Card>
</CardGroup>

***

### Best Practices

<AccordionGroup>
  <Accordion title="Regular Monitoring">
    * Check health factor daily, especially during volatile markets
    * Set up alerts for health factor thresholds
    * Monitor both collateral and debt asset price movements
  </Accordion>

  <Accordion title="Risk Management">
    * Start with higher health factors (>1.5) until comfortable
    * Consider correlation between your collateral and debt assets
    * Keep reserve funds available for emergency collateral additions
  </Accordion>

  <Accordion title="Market Conditions">
    * Increase health factor during uncertain market periods
    * Be aware that stablecoin prices can fluctuate from \$1.00
    * Factor in gas costs for emergency position management
  </Accordion>
</AccordionGroup>

<Check>
  Maintaining a health factor above 1.0 is essential to avoid liquidation. Aim for higher levels based on your risk tolerance and market conditions.
</Check>