Liquidation Mechanics and Risk

This lesson is for enrolled learners

The concept The safety of every DeFi loan rests on one number: the health factor, a single ratio summarizing how far a position sits from liquidation: health_factor = (collateral_value * liquidation_threshold) / debt_value A health factor above 1 means the position is safe; at or below 1, the position becomes eligible for liquidation. Any external liquidator (typically an automated bot,……

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