Liquidation

Liquidation happens when the collateral ratio drops below 150%. This ensures the platform avoids unsecured loans.

Maven Finance provides different collateralization ratio statuses for vault owners to assess risk and potential liquidation events. These include:

1. Low Risk: The collateral ratio is above 200%, allowing users to borrow or withdraw funds up to the maximum allowable capacity.

2. At Risk: The collateral ratio falls below 200% but remains above 150%. In this status, users cannot borrow or withdraw from the vault, but the vault is not yet eligible for liquidation. It is advisable to increase collateral or repay part of the debt to avoid liquidation below 150%.

3. Mark For Liquidation/Grace Period: The collateral ratio drops below 150%, allowing any user to mark the vault for liquidation. Once marked, there is a grace period of two hours before the vault can be liquidated.

4. Liquidatable: The vault's collateral ratio is below 150%, marked for liquidation, and the grace period has expired. At this stage, any user can liquidate the vault by repaying up to 50% of the vault's debt and receive a 10% reward relative to the liquidated debt.

The maximum amount that can be liquidated from an at-risk vault within a specific time window is determined by the "maxVaultLiquidationPercent" parameter.

Liquidators receive a liquidation fee reward, paid for by the vault owner as a penalty. Additionally, an admin liquidation fee of 10% is paid to the DAO Treasury whenever a liquidation occurs, calculated as a percentage of the liquidated debt.

Please note that a user cannot liquidate a vault if it is not eligible for liquidation at that particular moment, even if the vault has been previously marked for liquidation and the grace period has expired.