Liquidation

In OrdiLend's financial framework, the stability of borrowing is safeguarded through a well-defined liquidation protocol, which is activated when the value of the collateral dips beneath the loan amount. This process is regulated by the borrow limit, which delineates the risk boundary. Liquidation ensues when the value at risk breaches the maximum Loan-to-Value (LTV) threshold.

Understanding Max LTV

The Max LTV delineates the maximal portion of the collateral's value that is eligible for borrowing. For example, with a Max LTV of 80% for USDC, a user is permitted to borrow up to 80 USDC against 100 USDC worth of collateral.

The user's Borrow limit is ascertained by the aggregate LTV ratios of the collateralized assets, adjusted by their respective weights.

$$\mathrm{Borrow \ Limit} = \sum \mathrm{ Supply _{market} \times Max \ LTV_{market} \times \ Value_{market} }$$

Should the loan's value exceed 80% of the collateral's market worth, OrdiLend initiates a partial liquidation process. During this phase, OrdiLend or a sanctioned third-party liquidator is entitled to a 15% liquidation bonus. The procedure may involve liquidating a portion of the borrower's collateral, up to 50%. Post-liquidation, the borrower is refunded the balance after the liquidation bonus deduction, thus recalibrating the borrower's financial standing to a safer zone.

OrdiLend's system is engineered to execute liquidations autonomously. In such instances, OrdiLend reconciles the borrower's account, reassigns the collateral's worth back to the lending pool, and reimburses any remaining assets to the borrower.