Liquidation & Auction
Last updated
Last updated
If the value of outstanding borrowings/collateral on an account reaches a certain threshold, Themis Protocol executes a liquidation process to eliminate the risk of the agreement. This creates an auction market with a spread between the liquidated asset and the outstanding asset. If the price of the collateral continues to fall during the auction, a forced liquidation process is triggered.
The protocol will incentivize 130% of the gas limit equivalent of governance tokens to the liquidator for the transfer of the assets to be liquidated to the auction contract.
Liquidation Factor Trigger
The liquidated assets will have 4 hours of bidding time after the auction starts. If no one bids for four hours, then the starting price adjusts to 0.95*previous round price and resets the 4 hours of bidding time. The auction process is as follows:
Bidders bidding will initiate a transaction to the contract and lock in the funds and refund the last locked-in funds. Bidders can remove assets from the contract at the end of the round. A one-bid bidder will receive the lot directly at CurBidprice/0.95 A successful auction will return the designated outstanding assets to the Lending Pool, and the excess will go to the Treasury.
If the collateral price / outstanding principal and interest ≤ the risk factor (currently the risk factor is 1.03), then the liquidator is allowed to enforce the liquidation of the contract against the DEX agreement.
In order to avoid liquidation of the asset, users can adjust the liquidation risk by making partial repayments or increase the collateral. The collateral is redeemed when the borrowing account is fully repaid. Interest and incentives are settled once per reconciliation.
Yes, you can participate as a liquidator.
