Liquidations

Overview

If the value of the collateral in a vault falls below the minimum collateral ratio liquidation can occur. This process protects the protocol from insolvency risks.

During liquidations, a vault's collateral is lost as it is used to pay off the account's debt. The vault owner will no longer be able to retrieve the collateral by repaying debt. A liquidation thus results in a net loss of 18% to 20% of the collateral’s USD value.

There is a max liquidation limit set by the protocol of 100,000 OD, for liquidations of vaults with larger values there will be multiple rounds of liquidation.