Liquidations

What is it?

Liquidation is a process that occurs when a borrower's health factor goes below 1 due to their collateral value not properly covering their loan/debt value. This might happen when the collateral decreases in value or the borrowed debt increases in value against each other. This collateral vs loan value ratio is shown in the safety Indicators.

Background operations

1. Liquidator detects an ETH/USDC liquidatable position

2. Liquidator send 1000 USDC to the ETH/USDC vault

3. Fuji repays user's debt position in Compound

4. Fuji burns debt token 1000 FujiUSDC of the user

5. Fuji withdraws collateral ETH from Compound to ETH/USDC vault

6. Fuji burns collateral token 1 FujiETH of the user

7. Fuji swaps collateral to USDC

8. Liquidator receives debt balance + liquidation bonus