What Triggers a Liquidation?
A borrow position is eligible for liquidation when its health factor falls below 1.0. The health factor is calculated as:
Health Factor = (Collateral Value × Liquidation Threshold) / Total Debt
When this drops below 1.0, any external liquidator can repay part of the debt and claim the collateral at a discount — the liquidation penalty.
The Liquidation Penalty
RheoFI pays liquidators a bonus (the penalty, charged to the borrower) to make it profitable to keep positions healthy. Typical range: 5–15% depending on the market's risk parameters.
Partial vs Full Liquidation
RheoFI supports partial liquidations. Only enough collateral is seized to restore the health factor above 1.0 — protecting the borrower from having their entire position wiped in a single event.
How XRPL Makes Liquidations More Reliable
Because RheoFI routes collateral sales through XRPL's native DEX, liquidations execute in one ledger close (3–5 seconds) with predictable fees. This makes it profitable for liquidators to act quickly, keeping bad debt from accumulating.
FAQs
You can repay debt or add collateral at any time, including after the threshold is breached, as long as a liquidator hasn't already acted.
