Liquidations

A liquidation happens when your health factor drops below 1. At that point your position is underwater and any eligible liquidator may repay part of your debt and claim your collateral under protocol rules.

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When liquidation triggers

Your health factor compares liquidation-weighted collateral value to total debt. When it falls below 1, the protocol marks your account as liquidatable. Common causes:

• A sharp drop in collateral price
• Debt growing from interest while collateral value stays flat
• Borrowing too close to your limit without a safety buffer

XOXNO shows your health factor in real time. Treat below 1 as the danger zone, not a distant warning.

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What the liquidator does

A liquidator repays some of your debt using tokens from their own wallet. In return they receive your collateral worth more than the repayment. The extra collateral is the liquidation bonus, set per asset in risk parameters. The deeper underwater your position, the larger the bonus can be. A portion of the bonus goes to the protocol; the rest rewards the liquidator. Liquidation is partial by default. The liquidator repays enough debt to move your health factor back toward the protocol target, not necessarily your entire loan. There is no fixed close factor: how much can be repaid, and how large the bonus is, both depend on how far below 1 your health factor has fallen. One exception: if repaying the ideal amount would leave less than about $5 of debt behind, the liquidator is permitted to close the position entirely rather than leave an uneconomical stub.

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What you lose

You keep any collateral and debt that the liquidation does not touch. You lose:

• The collateral seized by the liquidator
• The liquidation bonus on top of the repaid debt value

If debt remains after liquidation, you still owe interest on the leftover balance. Your health factor may improve, but you may need to repay more or add collateral to keep a buffer above 1.

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How to avoid liquidation

1. Keep your health factor well above 1, not barely above it.
2. Add collateral or repay debt when prices move against you.
3. Avoid maxing out your borrow limit during volatile markets.
4. Check your position after large market events.

Act before your health factor crosses 1. Once liquidatable, you cannot stop a well-funded liquidator from acting.