Minimal Liquidation

The users must ensure that the health factor of their position remains at or above 1. If the health factor drops below 1, a liquidator has the power to initiate the liquidation process and obtain the

During the partial liquidation process, the liquidators have the flexibility to:

• Identify the specific borrowed tokens and the amount to be repaid to BitLen.

• Choose the collateral tokens to receive along with the liquidation premium.

BitLen will calculate the amount of collateral tokens and the liquidation premium that the liquidator will receive.

Dynamic Liquidation Premium

The incentive for liquidation rises in direct proportion to the decline of the health factor. As the risk associated with a position's health escalates (indicated by a falling health factor), liquidators are further motivated to act promptly to liquidate the position before it becomes insolvent.

A position's liquidation premium is influenced by several determinants:

• Health Factor

• Mode Liquidation Factor

• Token Liquidation Factor (applicable to both the collateral and the borrowed token)

The liquidation factor for stable tokens is the lowest, while major tokens carry a medium factor, and the most volatile tokens bear the highest factor. Modes that are pegged, such as stable and LST modes, are assigned lower liquidation factors.

The formula for calculating the liquidation premium is as follows:

Premium Calculation Formula

Premium = (1 / health factor - 1) * mode_factor * max(borrow token liquidation factor, collateral token liquidation factor)

Liquidation Health Factor Threshold

Liquidators are permitted to carry out liquidations until the health factor reaches a mode-specific maximum cap. This restriction is designed to regulate the volume of borrowed tokens that a liquidator is authorized to repay, thereby limiting the premium that the owner of the position must surrender to the liquidator.