Liquidation risk
If you borrow, you can be liquidated. This page covers what that costs you and how to avoid it.
When it happens
The moment your health factor drops below 100%. This can happen because of:
- A drop in collateral price.
- A rise in debt-token price.
- Accrued borrow interest pushing your effective debt above the threshold.
- Some combination of all three.
There is no warning. There is no grace period. Liquidation by holders of a pool's POOL_SQUARE_ROLE is always available via square(...); permissionless liquidation via liquidate(...) is additionally available whenever governance has granted that pool's POOL_SQUARE_ROLE to the pool address itself (the public path runs this.square(...) internally, so the role check tests the pool — granting/revoking that role from the pool is the per-pool on/off switch for permissionless liquidations).
What it costs
At the liquidation boundary (H = 100%) with default weights, the implicit liquidation bonus is (255/170) − 1 = 50%. A liquidation that clears $D of your debt at the boundary takes $D × 1.5 of your collateral — a net cost of 0.5 × D in collateral, paid to the liquidator on top of clearing the debt.
For a 1,000 XPOW debt being liquidated at the boundary, you lose 500 XPOW of collateral above and beyond the cleared debt. Strictly underwater (H < 100%) the realised bonus is smaller, because uniform slicing seizes collateral in proportion to your live C/D ratio.
Partial liquidations
The caller passes the partial liquidation exponent e on every call — e = 1 slices 50%, e = 2 slices 25%, and so on. There is no protocol-stored default; the value is the liquidator's choice (subject to the per-partial_exp POW_SQUARE PoW cost on the public path).
Crucially, partial liquidation preserves your health factor: the slice is taken uniformly from debt and collateral, so H_after = α·C·(1−s)/(D·(1−s)) = α·C/D = H_before. After a 50% liquidation at H = 0.95, you are at H = 0.95 with half the position size — not magically back above 100%. The position remains liquidatable until your H recovers (price move, interest swing, top-up, or settle).
Only e = 0 — a full liquidation — closes the position outright. H goes from "less than 100%" to "undefined" because both numerator and denominator are zero.
If your H stays underwater, another liquidation can be called immediately. There's no "minimum gap" between liquidations.
In a fast crash, a single position can be liquidated repeatedly in quick succession, each call shrinking it by 2^-e while leaving H unchanged.
Avoiding it
Three concrete strategies, in order of how active you need to be:
- Maintain healthy H. H ≥ 150% absorbs most normal volatility. H ≥ 200% absorbs most bear markets. Most casual users should run at H ≥ 200%.
- Set alerts. Use a monitoring service (open-source or commercial) to notify you when H drops below your threshold.
- Top up actively. Supply more or settle some debt the moment H drops below your safe floor.
What cascade attenuation means for you
If you're a borrower in a pool with high lock adoption, your individual liquidation risk is the same as in any pool — H < 100% means liquidation, regardless of others' lock state. But the systemic risk of a cascade pulling you under is reduced.
If you're a supplier, the picture is different: cascade attenuation makes it more likely you keep your full supply through a crash. The pool is more likely to remain solvent.
Where to go next
- Health factor — the trigger
- Monitoring health — practical tips
- Cascade protection — the systemic protection