Liquidations

When Does Liquidation Happen?

Liquidation occurs when a position’s collateral value no longer sufficiently backs the minted $SyUSD. This happens if the Collateral Ratio (CR) exceeds the Maximum Collateral Ratio (MCR) set for the market. Once this threshold is crossed, the position becomes eligible for liquidation.

What Happens During Liquidation?

1. Liquidators Repay Debt: Anyone can repay the borrowed $SyUSD in exchange for a portion of the collateral.

2. Liquidation Fee: Liquidators receive a bonus portion of the collateral as compensation for risks like slippage or gas fees. This fee is deducted directly from the borrower’s collateral.

Isolated CDPs

Synnax treats each Collateralized Debt Position (CDP) independently:

• Separate Parameters: Each CDP has its own liquidation eligibility, process, and thresholds.

• No Cross-Collateral Impact: Liquidation of one CDP does not affect any other positions you hold.

Key Terms

1. Collateral Ratio (CR):

• Formula: $SyUSD minted / Value of Collateral deposited.

• Indicates the health of a position. Lower ratios mean better collateral backing.

2. Maximum Collateral Ratio (MCR):

• The threshold at which a position becomes eligible for liquidation. Set per market.

3. Liquidation Fee:

• A reward for liquidators, deducted from the borrower’s collateral to compensate for their efforts and risks.

By maintaining a healthy Collateral Ratio, you can avoid liquidation and ensure your position remains secure.