Liquidation

CDP liquidation

Your CDPs will be liquidated when the position collateral ratio falls below liquidation threshold(MCR). Maximum liquidation amount is calculated so that the CDP's CR is at least 5% more than MCR to better protect borrowers' interest, unlike protocols such as AAVE and Compound, in which a CDP can be liquidated as much as 50% of its debt. Liquidation will increase MCR of liquidated CDP,

Liquidation bonus for liquidators

There is a penalty to borrowers when CDPs are liquidated, the penalty is rewarded to liquidator as liquidation bonus.

Liquidation bonus for liquidity providers

Liquidation bonus = LPP * liquidated debt amount, bonus is paid in form of collateral.

LPP = Liquidation Penalty Percentage

LPP is not fixed, when a CDP reaches its MCR threshold, LPP will increase by 1% for every 1% CR(Collateral Ratio) drop, actual LPP = LPP Base + (MCR-CR).

For CDPs with multi-collateral, LPP Base = ($Collateral A * BaseA + $CollateralB * BaseB)/($Collateral A + $CollateralB)

Collateral Type	LPP Base
WBTC	5%
WETH	5%
APT	5%
Sui	5%
USDC	3%
USDT	3%
DAI	3%
OT	7%
OSD	5%