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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%