Liquidations

Liquidation event takes place when the position of a Liquidity Provider move against them to the point where the loan to value ratio (LTV) goes above the position maintenance requirements. The maintenance margin threshold is between 84% of the initial margin at max leverage 5x (Stable Coin Farming), and 83% threshold at 5x leverag depending on the risk factor.

We are working hard in order to bring the threshold as close to 90% as possible. As we upgrade our infrastructure and harden our systems we will be increasing leverage as well as margin thresholds.

Token Pair	Leverage	Margin Threshold
USDC/USDT	5x	84%
SOL/USDC	5x	83%
JUP/SOL	5x	83%
SOL/PENGU	5x	83%

We are currently keeping a very large Liquidation Buffer. As we improve our infrastructure and keep upgrading and testing our protocol , we will be tightening this liquidation threshold further and closer to 90%.

LiquidationThreshold = (MaxLeverage - 1 ) ⋅ 1.05 / MaxLeverage where MaxLeverage - maximum allowed leverage for a market

If loan to value ratio is greater or equal to the liquidation threshold then a liquidation event can be called by liquidators and the position is forcefully closed.

Consider the following scenario :

$120 Notional value about to be liquidated.

Position size is withdrawn from Orca via a liquidation .

5% from whatever is leftover is calculated which is in this case $6. This is our platform fee that is paid to the liquidator (also known as liquidation fee).

Debt is repaid back to the Lending pool, the rest of the funds are sent back to the user.

Currently a 5% fee is charged for a liquidation event by our platform and paid to whoever called the "Liquidation instruction". This fee is transferred to whoever called the liquidation function (Liquidator). all remaining funds are sent back to the user.

User beware! Liquidations are not guaranteed to hit in a timely manner . Speed of liquidations is highly dependant on how congested the blockchain is.

Partial Liquidation

On pools with less liquidity and large position sizes, DefiTuna will attempt to liquidate the position in parts. This means that, in the event of an unsuccessful liquidation, instead of closing the entire position (100%), DefiTuna will first attempt to liquidate 50% of the position, followed by 25%, until a liquidation eventually takes place.