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Liquidations

A position becomes liquidatable once its debt crosses 75% of the collateral value. From there the mechanism is mechanical: a liquidator repays part of the debt, takes the matching collateral plus a penalty, and sells it back into EURC. This page walks that sequence — and the one step in it that can fail.

Last updated 1 day ago4 min readHandled by Kamino

When it triggers

Nothing happens while the debt sits below 75% of the collateral value. Between the 50% max LTV and that 75% threshold you simply cannot borrow more — the position is capped, not at risk. Crossing 75% is what opens it to liquidation, and it happens for one of two reasons: you borrowed closer to the ceiling, or the Chainlink price of your collateral fell.

Each liquidation can only close 25% of the debt — the close factor — so a position is unwound in passes rather than all at once. That leaves room to repay or add collateral between them.

The sequence

The liquidation, step by step

  1. Debt crosses 75%

    The Chainlink price moves the position past the liquidation threshold. Nothing is triggered before that point.

  2. Liquidator repays

    Anyone can step in and repay up to 25% of the debt in EURC — the close factor caps each pass.

  3. Collateral is seized

    They receive the matching collateral plus a 5% penalty. That penalty is their entire incentive.

  4. Collateral is sold

    The seized asset has to become EURC again. This is the step that needs a route.

Where step 4 happens — the two routes

Route A

Direct swap

Preferred
cbBTCEURC

One hop. LI.FI routes the seized cbBTC straight into EURC through the deepest cbBTC/EURC pool open at that moment. Fewer hops means less slippage, so this is what a liquidator tries first.

Route B

Fallback via USDC

When A is too thin
cbBTCUSDCEURC

Two hops. When the direct pool cannot absorb the size, the sale goes through USDC — the deepest market on Solana — and the USDC/EURC pool closes it. Slower and more expensive, but it clears.

What it costs

The liquidator keeps a 5% penalty on the collateral they seize. That penalty is the entire incentive, and it also has to absorb the swap cost and the slippage of turning the collateral back into EURC. Nothing here is charged to the reserve — suppliers only take a loss in the one case where no route clears at all, and the shortfall becomes bad debt.

Last updated 1 day ago · Kurate