V2 - Liquidation

Liquidation rules

When the debt ratio reaches a certain amount, liquidation will be triggered.

Debt Ratio = Debt Value / Position Value * 100%

Position Value = Principal + Borrowing = LP Position

Liquidation Example：

Example: Leverage 2X / LP Pool - HT-USDT

1. User deposits 1 HT, and borrows 10 USDT as Debt (1HT = 10 USD) to begin farming. Users Positition value is 1 HT & 10 USDT (20 USD).

2. During extreme market positions, HT drops from 10 USDT to 2 USDT, so the Debt Ratio drops to 83.33% and liquidation is triggered.

$$Debt Ratio = Principal / Position Value * 100$$

$$Debt Ratio = 10 USDT / (1HT + 10USDT)$$

$$Debt Ratio = 10 USD / (2 USD + 10 USD)$$

$$Debt Ratio = 83.33$$

3. With the example in 2. the user’s position value changed from 1 HT + 10 USDT (~20 USDT) to 4.472 HT + 2.236 USDT (~11.18USDT)

1. 10USDT will be transferred into the money market

2. 0.559 USDT (5%) will be transferred to the liquidator

3. 0.621 USDT will be returned to the initial user

Liquidator

At the current stage, Flux Foundation is the sole liquidator for high-efficiency and reducing margin call risks. 5% of all liquidation proceedings will be utilized for $FLUX buy-backs on the secondary market.

Liquidation Flow Chart