Liquidations

Liquidations occur when a borrower's health factor drops below 1. When this occurs, a liquidator can pay back 50% of the borrower's debt and receive a 1:1 USD value ratio of the borrower's collateral plus a liquidation bonus to incentivise liquidators. Liquidations are necessary in order to make sure that all Cryndex Assets are at a minimum collateralised 1:1 to their USD value collateral.

A health factor above 1 represents a position that is above the liquidation threshold. Regular monitoring is essential, as the health factor fluctuates based on both the value of collateral and borrowed assets. To improve the health factor, users can either supply more collateral or repay part of the borrow position. The health factor is directly tied to collateral value. If the value rises, the health factor improves; if it falls, the health factor declines, increasing the risk of liquidation.