Health Factor The health factor determines if a position can be liquidated:
Health Factor = Collateral Value × Liquidation Threshold Borrow Value \text{Health Factor} = \frac{\text{Collateral Value} \times \text{Liquidation Threshold}}{\text{Borrow Value}} Health Factor = Borrow Value Collateral Value × Liquidation Threshold When Liquidation Occurs A position becomes liquidatable when:
NFT floor price drops significantly
Accumulated interest pushes debt too high
Health factor falls below 1.0
Liquidation Process
Detection - Liquidator identifies position with HF < 1.0Repayment - Liquidator repays borrower’s debtCollateral Transfer - Liquidator receives NFT collateralBonus - Liquidator gets discount on collateral value
Avoiding Liquidation
Best practices to stay safe: - Monitor your health factor regularly - Keep
borrowing well below max LTV - Repay debt if prices drop - Add more collateral
if needed
For Liquidators Liquidators help maintain protocol solvency and earn the liquidation bonus.
Requirements
Monitor on-chain events for unhealthy positions
Have sufficient tokens to repay debt
Execute liquidation transaction
Liquidation Bonus Liquidators receive collateral at a discount, incentivizing quick liquidation of risky positions. 
