Liquidations

This documentation is a work in progress!

Anyone can liquidate a ICDP under the liquidation threshold by repaying debt of the position, increasing its Collateralization Ratio. The repaid value, plus a liquidation incentive, is seized from the collateral and sent to the liquidator.

The liquidator decides which Kresko Asset to repay and the Collateral Asset to seize in return.

Liquidation Process

While a CDP’s collateral and debt can be composed of several assets, liquidations operate exclusively on one debt asset and one collateral asset at a time.

If the CR remains below the LT after a liquidation call, it is subject to additional liquidations up to the Maximum Liquidation Ratio.

Example

Example

• The liquidation incentive is set at 5%

• Close fee of the Kresko Asset is set at 0.5%.

Liquidator repays $100 worth of debt.

The seized collateral will be 105% of the repay value so the liquidator seizes $105 worth of collateral.

The protocol receive the close fee of 0.5% which equals $0.5.