Liquidations

The Liquidation Loan-to-Value (LLTV) ratio in MORE markets is a critical parameter that determines the maximum amount a borrower can obtain relative to the value of their collateral. This threshold indicates the point at which the borrower’s collateral becomes eligible for liquidation, should the market value of the collateral decrease relative to the loan and thus exceed this threshold.

In order to protect lenders' deposits, the protocol includes a liquidation provision.

For standard borrowers who are overcollateralized, when their LTV in a given market exceeds the market's LLTV, the borrower's position is considered to be unhealthy. That user's position becomes eligible for liquidation. Any third party can execute a liquidation of the unhealthy position by repaying the borrower's debt in exchange for the equivalent amount of the collateral asset provided by the borrower. To incentivize liquidators to execute this function, an incentive, the Liquidation Incentive Factor (LIF) is also provided.

If the collateral value falls, borrowers might need to add more collateral or pay down a portion of their loan in order to avoid reaching the LLTV threshold and triggering a liquidation.

If a premium borrower has an undercollateralized loan and their position crosses the premium LLTV ratio, the loan can be fully liquidated. Part of the loan is covered by the provided collateral. The remaining amount is accounted for through the issuance of debt tokens.