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Liquidation and Liquidity Theoretical
We require users to specify whether they want to use a lent asset as liquidity for borrowing.
Every open borrow is subject to be liquidated by a third party (that is, anyone) if the underlying value of the collateral locked in relation to the current value of the borrowed assets, falls under a certain level.
The following values are in the user's balances
Note the n subscript implies the specific token
Liquidation is a process in which one user repays the debt of the a borrower and essentially purchases some of the borrowers collateral at a discounted rate relative to the amount of repayment. On the Finterest protocol, we consider a user as underwater when they hit the liquidation point specified below:
When you hit liquidation point, a user may repay your debt until:
Liquidation/Repayment of a borrower's debt happens on an individual token and not for all assets at once.
Let n = the token that is being borrowed and m = the token that the liquidator wants to seize from the borrower
- 1.NOTE:
Only the amount repaid will be taken from your balance so rest assured you are not being charged anymore than whats repaid.
- 2.Borrower hit liquidation point
- 3.
- 4.