Liquidations

Liquidations in Solera occur when a borrower’s Health Factor drops below 100%, indicating that their collateral no longer sufficiently covers their outstanding loan. This can happen if the value of the collateral decreases or if the value of the borrowed debt rises relative to the collateral.

The Health Factor reflects this relationship by comparing the collateral’s Max LTV (Loan-to-Value ratio) to the loan, determining whether the borrower’s collateral remains adequate to cover their debt, or if the value has crossed the Liquidation Threshold .

Liquidations are triggered by real-time price data provided by Oracle price feeds. Once a liquidation is necessary, it is executed by liquidator bots, which are run internally by Solera as well as by third-party participants. A Liquidation Penalty is applied to the collateral during this process, incentivizing liquidators to act swiftly and helping maintain the protocol’s financial stability.

All liquidations on Solera are open source and permissionless, allowing anyone to participate as a liquidator. To learn more about running a liquidation bot, visit the relevant section on Solera's documentation.