To ensure the security of the lending pool, leveraged positions are constantly monitored for value, based on collateral + leveraged amount + interest owed. Based on the position value, a position health can be calculated.
Positions where the health drops below a factor of 1 are subject to liquidations in order to prevent bad debt from entering the system.
Position Health is a numeric representation of your positions value compared to the debt. If your health factor drops below 1, you will enter liquidation. The higher the Position Health is, the safer the position is
If the health factor drops between 0.99-0.95, liquidations will only sell off half your position to bring the position back to a healthy state (and so on and so on) avoiding a total loss of funds
This is beneficial for both; the protocol to maintain security of lending assets, and the user to be able to retain some of their funds
If the health factor drops below 0.95, liquidations will sell the full position to payback debts
There is a 5% liquidation fee for positions that become liquidated. This fee is split 50/50 between Rodeo and the Liquidation Bot
Rodeo constantly monitors the health of all open positions via our own custom Liquidation bot(s)
As a decentralized protocol, the liquidation process is open for anyone to create their own liquidation bot to earn fees and secure the protocol