A liquidation is a process that occurs when a borrower's Health Factor is reduced to 1 or lower due to their collateral value not properly covering their loan/debt value. This might happen when the collateralized asset decreases or the borrowed debt increases.
Omni protocol utilizes Dutch auctions for liquidating loans based on their health factor, a departure from traditional auction mechanisms where bidding drives the price up. In Dutch auctions, pricing starts high and progressively decreases either over time and liquidators can decide when to bid. This approach enhances efficiency and fairness compared to conventional auctions.
The liquidation bonus, offered as an incentive to liquidators, is asset-specific. Assets that present more challenges in liquidation are associated with higher bonuses. You can access detailed information about the liquidation bonuses for each asset on the Analytics page.
There is also a separate liquidation bonus given to assets where the current timestamp has exceeded the expiration timestamp and the loan position is still healthy. Learn more about expiration date.
The liquidation parameters for each asset are determined by the asset's risk. To view the specific liquidation figures including liquidation bonus and expiration date, please click here