Liquidations

The health factor measures the safety of a borrow position in HypurrFi.

It is calculated as:

Health Factor = (Total Collateral Value * Weighted Average Liquidation Threshold) / Total Borrow Value

The health factor measures a borrow position’s stability. A health factor below 1 risks liquidation. The liquidation threshold determines the maximum percentage of value that can be borrowed against the asset. For example, if a user supplies $10,000 in HYPE with an 80$6,000 in USDC, the health factor would be 1.333.

A health factor above 1 represents a position that is above the liquidation threshold. To improve the health factor, users can either supply more collateral or repay part of the borrow position. The health factor is directly tied to collateral value. If the value rises, the health factor improves; if it falls, the health factor declines, increasing the risk of liquidation.

Collateral value is priced according to oracle data.

Liquidation happens when a borrower’s health factor drops below 1, meaning their collateral is insufficient to cover the borrowed amount. This can occur when the value of collateral decreases or the borrowing amount is increased. When a liquidation occurs, up to 50% of the borrower’s debt is repaid by a liquidator. A liquidation fee is also levied against the borrower’s collateral.

At launch, liquidations will be conducted by HypurrFi, and can be voted to a permissionless model according to a governance.