Collateral & Liquidations
Last updated
Last updated
Liquidations
A critical process triggered when a borrower's health factor falls below 100%. This may happen when the collateral value decreases, or the borrowed debt increases relative to each other.
Liquidations are triggered by Oracle price feeds and managed by liquidator bots (both internal and third-party). A liquidation penalty is applied to the value of the collateral during liquidation, incentivizing liquidators.
Solera supports three types of collateral, each with different protocol capabilities. Each asset is classified according to the asset risk assessment framework.
Main Market Collateral: ERC-20 and OFT tokens with high liquidity.
Isolated Market Collateral: Assets that may not meet the criteria for the main market but are supported via isolated markets with stricter borrowing limits.
RWA Collateral: Real-world assets (e.g., US Treasuries) that require special considerations due to liquidity constraints and non-immediate redemption.
RWA Integration: Liquid RWAs are onboarded directly or via strategies integrated with CDP-backed stablecoins. Over time, Solera will develop new lending primitives to better support RWA lending.
Each new token introduced as collateral increases protocol complexity and solvency risk. Only assets with strong risk profiles should be supported as collateral.
Solera's main lending market is designed after Aave, where a users account is addessed by a health factor. When users
For more information and tips on managing your health factor, refer to
Solera's Isolated markets run on the Morpho stack. As such, all liquidation concepts from Morpho apply. Read for more information on liquidation mechanisms and