A concrete example
10,000 × 80% ÷ 6,000 is approximately 1.33. Below 1 a position becomes liquidatable.
In context
The permitted liquidation fraction depends on the version and market conditions. Liquidation is not a stop-loss promising a particular exit price. Price gaps, oracle behaviour and congestion can make an apparently manageable position deteriorate before an owner can react.
Explore the full explanation
DeFi
Aave health factor and liquidation
The health factor is threshold-weighted collateral value divided by total debt value.
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